One advance of construction loan money, released after the lender confirms that the work it pays for is in place.
The OCC handbook describes two common plans. A standard payment plan is normally used for residential and smaller commercial jobs. For residential construction it most commonly has five equal installments. The first four are paid when the build reaches agreed stages, checked by inspection, and the last is paid only after the legal period for mechanics liens has run out.
A progress payment plan is normally used for commercial projects. The borrower sends a draw request that lists the funding by construction phase and cost category, certifies that the loan conditions are met, and includes waivers from subcontractors and suppliers showing they were paid for finished work. The bank confirms progress on its own, then funds the costs incurred, less any holdback.
Some banks pay on a voucher basis instead, bill by bill. Under any plan, the handbook says each draw should be in line with the improvements in place on the inspection date.
How it shows up in the data here
A draw is an event inside one loan, and no public file records it. What the data shows is the total that results: each bank's construction and land balance held on the quarter-end date. Find lenders with construction on their books by state at construction lenders. Nothing here shows a bank's draw schedule, its inspection practice or how fast it funds a request.
Go further
- Construction lenders by state: Lenders with construction balances, state by state.
- Deal summary builder: Turn the facts of a deal into a clean one-page summary you can copy or print. Nothing is saved or sent.
- Construction loan package checklist: A construction lender is lending against a building that does not exist yet. The package has to show what it will cost, who will build it, where every dollar comes from, and how the loan gets repaid when it is done.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
Related terms
- Construction loan: A short-term loan that pays for building or renovating a property, advanced in stages as work is finished and repaid from a sale or a permanent loan.
- Retainage: The share of each construction payment that is held back until the job is finished and the liens are cleared.
- Cost overrun: The amount by which a construction project costs more than its budget, which the borrower is normally expected to cover.
- Interest reserve: An account set up by the lender that pays the loan's interest during construction and lease-up, usually funded as a line in the loan budget.
- Title insurance (lender's policy): A policy that protects a lender against loss if its mortgage turns out not to have the lien priority it expected, or if title to the property is defective.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.