On a renovation or construction loan, the lender usually does not hand over the rehab money at closing. It releases funds in stages, called draws, as work is completed. Understanding the basic cycle helps you set your client's expectations. Details vary by lender and by loan, so ask about the specifics of your file.
It starts with the budget
The borrower and lender agree on a budget with line items, such as demolition, framing, roofing, plumbing and finishes. Each draw is tied to progress against those lines, so a clear, realistic budget is the foundation of a smooth project.
The draw cycle
Most draw processes follow the same pattern:
- The borrower completes part of the work
- The borrower submits a draw request showing what was done
- The lender confirms the progress, often with an inspection or photos
- The lender releases funds for the verified work
What can slow a draw down
- A request that does not match the approved budget lines
- Missing invoices, lien waivers or other documentation
- Work that is ahead of or behind what the request describes
- Delays in scheduling the inspection
How a broker helps
Remind your client to keep records as the work goes, submit complete requests, and communicate early if the scope changes. A short check-in after each draw keeps the relationship strong and the project on track.