A construction loan turns into a permanent loan automatically after construction is complete. It is called a Construction / Permanent Loan.
Highlights of the Construction / Permanent Loan
* One Rate / One Closing
* 12 Month term to build and during that time, you only pay interest on the amount draw
* Permanent rate locked before construction begins
Maximum Loan Amounts and LTVs
Loan AmountLTV
0 to $750,000 85.00% $750,001 to $1,000,000 80.00% 1,000,001 + 75.00%
Construction Loan Draw Schedule And Formula
The common formula used to calculate a construction loan draw schedule:
Before the draw schedule even begins, the lot is purchased and paid off if the buyer is combining the house and lot for their construction loan.
1. First Draw(Slab/Foundation) 15%. Any builder "soft costs" such as permits are added to this advance. Septic and any site work is also included. The loan fees, attorneys fees, title insurance, etc. are paid at closing.
2. Second Draw(Framing/Rough Carpentry) 10% This draw is released when foundation is poured. First floor walls and sub flooring in place with exterior walls sheathed.
3. Third Draw (Roof/Mechanicals) 20%The draw will include second floor sub flooring and walls, roof framing, rough plumbing electrical and HVAC inspected, and any miscellaneous items like garages and pools.
4. Fourth Draw (Exterior/Interior Finishes) 20%. The draw includes doors and windows installed, drywall installed, exterior siding or painting complete
5. Fifth Draw (Trim-out)20%. Draw includes all interior trim, cabinets, paint and final plumbing HVAC and electrical
6. Final Draw (Project Closeout) 15% Draw includes all decks and patios, house cleaned. appliances , and any landscaping. The final inspection and occupancy permits are issued.
This schedule may be modified as determined by local requirements.
Your contractor may complete construction on a different schedule. Funds can be disbursed for each item upon completion.
