When does the construction loan term begin? A. A Construction loans typically has a 12 month term which begins on the date the borrower signs the loan documents.
Where are the funds sent? A. At loan closing, the borrower signs a Construction Disbursement Account Information form that gives specific information about the bank account being used for the project. We recommend opening an account specifically for the project. If any change occurs to the checking account, you should notify us immediately in writing.
What are hard costs? A. Hard costs are direct costs associated with the labor and materials used for the actual construction of the home. Hard costs are also known as "direct costs", "board and nails", "on-site costs" and "hard cost improvements."
What are soft costs? A. Soft costs are indirect or "off-site" costs not directly related to labor or materials for construction. Examples of soft costs include building permits and architectural fees.
What are deposits? A. Vendors for items like cabinets, light fixtures, windows, appliances or any other specialty improvement that requires custom craftsmanship usually require deposits. In general, 50% of the budgeted amount for these items can be dispersed. Examples of items that typically require a deposit are:
Window & Doors
Cabinets & Appliances
Flooring
Custom Lighting
How does the disbursement process work? A. Disbursements on a construction loan are designed to reimburse the borrower as the construction of the home progresses. Dispersment is usually handled in one of two ways. The first, specific invoices for work done can be submitted for payment. The invoice is compared to the budgeted amount to make sure costs are on track. The second, disbursement is based on the amount of work that has been completed on the project. For example, if the construction budget is $150,000 and the project is 10% complete (based on the inspection), we will disburse the borrower up to $15,000 on the project. This disbursement would be in addition to any advances or deposits the borrower may be entitled to receive.
Is there a set schedule for requesting draws? A. There is no set schedule, but we typically request that no more than one draw per month be submitted.
How does the borrower request a draw? A. You can e-mail, fax or mail a Draw Requests to us.
What does the borrower do if an extension of the construction loan term is needed? A. Loans that go beyond the required completion date are technically in default pursuant to the Construction Loan Agreement. If the loan has gone beyond this required completion date, all loan draws are on hold until an extension is granted. The borrower needs to contact us at least 30 days prior to the required completion date if the construction is not at least 90% complete.
Is there a fee if an extension is needed? A. YES, there is a fee associated with an extension of the required completion date.
Loan Types