Basic construction
loan draw schedule and formula
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Following is the basic formula used in calculating construction loan progress
draws:
*1. LAND ADVANCE = up to 50% (**gross) of the current value of the
property, or the purchase price when purchased within last 6 months, whichever
is less. (rule of thumb: More expensive and/or larger parcels impose a lower
land advance percentage due to "land to improvements" ratio. This draw is
released at close of loan escrow. The loan fees, escrow fees, title insurance,
etc. are taken out of this land advance, up front, at close of loan escrow.
*we can arrange for payment of 1/2 your permits and school fees here
*2.FOUNDATION DRAW = Average usually approximately $10,000.00 to
$50,000.00 unless the foundation is engineered or above average in cost in which
case this figure might be adjusted. This draw released when the foundation is
poured and stripped and all permits paid for and obtained.
*you can add a sub floor and/or top plate draw here
3.ROOF SHEETING = Approximately 40% of the balance of funds after
deducting amount of draws 1, 2, and 5. This draw is released upon completion
of roof sheeting nailing.
4. SHEETROCK = Approximately 60% of the balance of funds after deducting
amount of draws 1, 2, and 5. Draw released upon completion of sheetrock nailing.
*many will have us create a cabinet-trim-doors-paint draw here
*5.FINAL = 20% of the principal amount of the loan plus accrued interest.
This draw released when home is complete, finished and turn key. Half this draw
can be set up to be released upon for example "all doors, paint, cabinets etc".
Occasionally a borrower will request more than 5 draws. We can create additional
draws between some of these 5 basic draws and debit the amount of an additional
draw created from the succeeding or next in line draw. There's a small fee charged
for each additional draw created of approximately $100 to $150 each, depending
in part on how far our inspector must travel for inspections.
* There is little, if any, room for negotiation in draws marked with
an asterisk (*), so you can see that additional draws probably could not be inserted
between draws 1 and 2 (COE and foundation). i.e. Additional draws are possible
after draw #2 (foundation), #3 (roof sheeting) and #4 (sheetrock) from draws
#3, #4 and #5. For example, one might wish to have a draw created between roof
sheeting and sheetrock at "O.K. to cover" or when insulation is in.
** The loan fee, escrow fee, title insurance, etc. come off the top
of the loan, they are taken from the land advance, up front, at close of loan
escrow.
Also for your perusal and advance awareness, please see a copy of the form letter we send to anyone subordinating to a loan brokered
by us. This letter goes out after loan escrow is opened and prior to close. Borrowers
and (potential) subordinators are encouraged to phone Brad Evans (530-272-5916)
if they have questions or are in need of more information on the topic of subordination. |
