Construction Loans FAQ

                               

 
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Soft Costs of Construction, Deposits,
Disbursements and the Draw Process

 
 

» What are soft costs?

   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.  Soft costs are disbursed monthly on an "as needed" basis, with invoices, receipts, cancelled checks or other evidence of payment.  However, soft costs such as builder overhead/supervision are disbursed in proportion to the percentage of completion of the home.

» What are deposits?

Vendors for items like cabinets,
light fixtures, windows, appliances or any

 
 

 s custom craftsmanship usually require deposits.  We will release up to 50% of the total amount budgeted in the specific line item for the following deposits:  

    ·
  Window /doors  
    ·
  Cabinets/appliances  
    ·
  Flooring  
    ·
  Custom Lighting
 

» How does the disbursement process work?

   Disbursements on a construction loan are designed to reimburse the borrower as the construction of the home progresses.  We will disburse construction proceeds based on the amount of work that has been completed on the project.  For example, if the construction budget is $100,000 and the project is 10% complete (based on the inspector's view), Home Construction Lending will disburse the borrower up to $10,000 on the project.  This disbursement would be in addition to any advances or deposits the borrower may be entitled to receive.  Disbursements for soft or direct cost expenses must be verified by an inspection.  

» Is there a set schedule for requesting draws?

   There is no set schedule, but we require that no more than one draw per month be submitted.  

» How does the borrower request a draw?

   To conveniently request a draw online, the borrower can go to our web site "My Loan Information".  The borrower also may e-mail, fax or mail Draw Requests to us.  (The borrower does not need to send the original Draw Request with a fax or e-mail.)  

» How will borrowers know if their draw request has been approved?

   When we receive the borrower's Draw Request in the Disbursement Unit, we immediately order an inspection to verify the status of construction on the borrower's home.  The inspection is performed within 3 to 5 business days from the time we receive the Draw Request.  When the inspector verifies the percentage of completion and we receive verification from the title company that the property is free of mechanics liens, the Draw Request will be funded.  A CTP Customer Service Representative will call the borrower to discuss the inspection results, the amount of the Draw Request and the date the borrower can expect the funds to be wired to his or her account. We advise that the borrower verify his or her bank's receipt of funds prior to issuing checks.  Please note that the borrower’s funds may not be available until the next business day.  The borrower can also access the status of his or her draw request 24 hours, 7 days a week by visiting our web site “My Loan Information”.

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