Construction Financing: Creating A Draw Schedule

Once you've secured financing, it's time to create a draw schedule to pay for construction.

Congratulations! You’ve gotten your construction financing in place. So now what? You’ll need to determine how to allocate the money while the home is being built. It's foolish to pay for the entire project upfront, but you can’t wait until the end because workers have to be paid and materials must be bought through the six months to a year it takes to turn your log package into a finished home. The solution is a draw schedule. It spaces out payments over a specified time period to meet expenses as they occur.

The number and amount of draws vary according to the terms of your construction loan. Some lenders will allow a draw to pay for your log package when it’s delivered; others may withhold payment until it is erected. Be sure the terms of your construction loan are acceptable to your log home producer so that delivery and erection proceed smoothly.

A typical draw schedule might call for four to six payments, spread out as follows:

• For site prep and foundation excavation.
• A downpayment to being log package production.
• After the log package is delivered, erected and under roof, and the windows and exterior doors are installed.
• After the electrical wiring, plumbing and heating-cooling system are installed and approved, and cabinets and interior doors have been hung.
• After remaining interior work is finished and the certificate of occupancy issued.

Regardless of how your draw schedule is arranged, the lender will inspect the progress of the work up to the stated draw interval and approve the disbursement of funds. In some cases, the lender may withhold the final payment until you have lien releases from the contractor and all subcontractors.

Hire a Builder to Find Land

Even though buying land precedes design and construction of your home, a log home builder might be a big help in finding the right property. Builders are often local to the area you’re hoping to build in and can provide insight into how land affects the building process.

Prospective log home owners sometimes fall in love with a particular home plan and buy a lot without realizing that it’s ill suited to that design. A qualified builder can spot such issues quickly.

Builders may also be able to point out cost differences between what appear to be comparable lots. Lots costing $35,000 and $50,000 might not look all that different, but a builder could spot problems preparing the cheaper site for construction that would hike its cost higher than the initially more expensive one.

DIY Code Checklist

If you’ll be hiring a contractor, knowledge of building codes won’t be an issue because you’re paying that professional to know and follow them. If you’ll be taking charge of your project yourself, however, you’ll need a good understanding of what is required. Visit your local building-code authority and ask the following questions:

1. What codes are currently being enforced?
2. Are any changes in the prevailing code anticipated anytime soon?
3. Are summaries or fact sheets available that explain major code requirements and inspection procedures?
4. Do local codes treat log homes differently from ordinary homes? (The International Residential Code, which many municipalities use as the model for their code, includes a supplement, ICC 400-2012 Standard for Log Home Construction. Half-log construction follows the standard IRC.)
5. If applicable, do they treat second homes differently from primary residences?
6. Are there special code concerns for off-grid properties? (If your project will serve as education for local officials, be prepared for things to take longer.)