Construction Draw
Also known as: Draw Schedule, Progress Payment, Construction Loan Draw
A scheduled disbursement of funds from a construction loan at specific milestones during the building process. Common in custom home construction.
Detailed Explanation
In custom home construction, the builder is typically paid in stages as work progresses rather than receiving the full amount at closing. Each payment is called a draw, and the schedule of payments is the draw schedule.
Common draw milestones include lot purchase, foundation completion, framing, rough-in (plumbing, electrical, HVAC), drywall, interior finishes, and final completion.
Construction draws are more common in custom home builds. For production builders, the buyer typically pays the earnest money deposit at signing and the balance at closing — the builder finances construction from their own resources.
In Your Contract
In custom home contracts, look for "draw schedule," "progress payments," or "construction disbursements." The schedule should list each milestone, the percentage or amount due, and the conditions for release.
Key Points
- 1Payments to the builder at construction milestones.
- 2Most common in custom home builds, not production homes.
- 3Each draw should be tied to verifiable completion of specific work.
- 4Inspect the work before approving each draw payment.
- 5A construction loan funds the draws; it converts to a mortgage at completion.
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