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Construction
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ContractorsWife99

My builder keeps talking about "draw schedules" and I have no idea what he means. How does the money actually get released and who controls it?

Answer from Jon Howard (HCP): A draw schedule is the blueprint for how your loan funds flow from the lender to the builder during construction. You are not handed a check for $500,000 on day one — funds are released in tranches as work is physically completed and verified by a third-party inspector.

A typical single-family build has 5-7 draws: (1) lot / foundation / site prep — 15%, (2) framing / roof dried in — 20%, (3) mechanicals (plumbing, electrical, HVAC rough-in) — 15%, (4) drywall / insulation / exterior — 20%, (5) cabinets / flooring / interior trim — 15%, (6) final finishes / landscaping — 10%, (7) final / CO — 5%. These percentages flex based on your builder's contract.

Process per draw: (a) builder submits draw request with line items and lien waivers from subs, (b) lender orders an inspection (usually $150-250, billed to you) to verify work is actually done, (c) title company runs a title update to confirm no new liens, (d) funds release to the builder, usually 3-7 business days end-to-end. Critical: you pay interest only on the drawn balance, not the full commitment. A $500k loan with only $150k drawn accrues interest on $150k. Also — never let your builder get more than one draw ahead of completed work. That is how construction deals get underwater.

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Denise W.
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We just wrapped up a ground-up build on a 5-acre parcel outside Loveland and I can vouch for every step of Jon's answer. Our lender ran exactly 5 draws and the inspector catching one of our sub's corner-cutting on the plumbing rough-in absolutely saved us money.

Couple things I'd add from the owner side: (1) ask your builder if their draw request form matches your lender's format. Ours didn't, and the first draw got held up 10 days while we reformatted everything. Small thing, huge delay when you're paying interest. (2) The inspector fee gets billed to you — budget $200-400 per draw. On 5 draws that's another $1,500 in the total cost of build that nobody listed on any proforma.

The OTC product Jon mentions was the single biggest money-saver for us. We got one appraisal, one title policy, one round of closing costs. Friends who did a two-close paid almost $9k more just in duplicate closing fees because they re-qualified at completion when rates were higher than when they started.

And yes — get the draw schedule in the contract BEFORE you sign. Our first builder refused and that was the end of that conversation.

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RentalRookie
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Finished a ground-up on a small cabin last year and the draw-schedule breakdown here matches my experience down to the draw percentages. The inspector fee per draw was the line I wasn't prepared for — $350 times 5 draws was real money I hadn't budgeted. One thing to add: lock your builder into the draw schedule via the contract. If they want to front-load payments, that's a capital-structure signal you want to catch early.

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Jordan Park
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Finance major here, looking at construction loan draw scheduling as a case study this semester. The "independent inspector" piece is the structural fraud control — it's the same principle as a bank trustee on a municipal bond draw. Contractor-paid inspectors are a known conflict-of-interest problem in the build-to-rent industry (Freddie's 2023 white paper on SFR build fraud documents several cases). Jon's product setup with the lender-hired inspector is doing a lot of quiet work here that most borrowers will never see or appreciate.

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Jon Howard
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A draw schedule is the playbook for how your construction loan funds release over time. Nobody hands the builder a $400k check on day one — the money releases in stages tied to completed work, verified by inspection.

A typical 5-draw schedule on a single-family build:

  1. Draw 1 (15%) — foundation complete, slab poured, plumbing rough-in below grade inspected.
  2. Draw 2 (25%) — framing, roof sheathing, windows installed, dried-in.
  3. Draw 3 (25%) — mechanicals rough-in complete (electrical, plumbing, HVAC), insulation, drywall hung.
  4. Draw 4 (20%) — finishes (cabinets, flooring, fixtures), paint, final trim.
  5. Draw 5 (15%) — certificate of occupancy, final inspection, punch list complete.

Who controls it: The lender (me, through the construction admin team) controls release. The builder submits a draw request with invoices and percent-complete. An independent inspector we hire — not the builder's guy — confirms the stage is actually done. Funds wire from escrow to the builder usually within 3–5 business days after inspection passes.

On our One-Time-Close (OTC) product, there is no second closing and no re-qualification when you convert to permanent — saves typically $6,000–$10,000 vs. a two-close structure.

Practical next step: Have your builder share his written draw schedule BEFORE you sign the contract. If he will not put it in writing, that is a red flag.

Happy to run your specific numbers — call 970-457-9107 or email jon@homesteadcapitalpartners.com.

NMLS #2587985 · Licensed Colorado · For educational purposes — not a commitment to lend.

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