A $480,000 construction-to-permanent loan does not typically land in your builder’s account on day one. If the first approved draw is $120,000 at a 7.25% construction rate, interest for that month is $725. A fully drawn $480,000 balance would create $2,900 in monthly interest, a $2,175 difference while the home is being built. Once converted to a 30-year fixed loan, a 7.25% principal-and-interest payment is about $3,274 per month, versus about $3,356 at 7.50% – an $82 monthly difference and roughly $4,920 across the first five years, before taxes and insurance.
That is why a construction loan draw schedule matters. It controls when your broker releases funds, when your builder gets paid, how much interest accrues during construction, and whether a delay becomes a cash-flow issue. A well-built schedule keeps the project moving without releasing too much money before the work is complete.
Table of Contents
- How construction draws work
- A typical construction loan draw schedule
- Inspections, retainage, and change orders
- Local pricing and build conditions
- Broker access versus a single-shelf institution
- Credit preparation before you build
- Frequently asked questions
How a construction loan draw schedule works
Construction financing is milestone-based. Rather than funding the entire loan at closing, the broker-approved construction program releases money in stages as the home reaches documented points of completion. The builder submits a draw request, an inspection confirms the completed work, and the draw is released according to the loan agreement.
Most borrowers make interest-only payments on the outstanding balance during the build. That can make early construction payments lower than the final mortgage payment, but it does not make the project cheap. The balance rises as more work is completed, so the payment rises with it.
A draw schedule also protects both sides. The borrower is less likely to pay ahead for unfinished work, while the builder has a defined path to receive funds for labor, materials, and subcontractors. The exact milestones vary by project, local code requirements, and whether the structure is a conventional construction-to-permanent loan, FHA construction financing, VA construction financing, or a specialty option for self-employed or investment borrowers.
Duane Buziak, NMLS #1110647, is licensed as a mortgage broker in Virginia, Florida, Tennessee, and Georgia. His role is to help borrowers compare program structures, documentation requirements, credit strategy, and construction timelines before a lot is purchased or a contract is signed.
A typical construction loan draw schedule
A six-draw schedule is common, although some builders use five, seven, or more draws. The percentage assigned to each stage should reflect real construction cost, not simply a builder’s preferred billing pattern.
| Milestone | Typical share of $480,000 loan | Cumulative balance after draw | |—|—:|—:| | Closing, permits, site work, and foundation | 15% – $72,000 | $72,000 | | Framing, roof, and exterior sheathing | 20% – $96,000 | $168,000 | | Windows, exterior doors, rough plumbing, electrical, HVAC | 20% – $96,000 | $264,000 | | Insulation, drywall, siding, and interior trim | 20% – $96,000 | $360,000 | | Cabinets, flooring, fixtures, paint, and finish work | 18% – $86,400 | $446,400 | | Final completion and certificate requirements | 7% – $33,600 | $480,000 |
The first draw may include land payoff, if the lot is not already owned free and clear, as well as permits, excavation, and foundation work. Later draws usually become larger once framing and mechanical systems begin. The final draw should not be treated as an automatic release. It is commonly tied to final inspections, punch-list completion, and occupancy documentation.
A builder who asks for an unusually large upfront draw deserves a careful conversation. There may be a reasonable explanation, such as expensive engineered foundation work or materials purchased in advance. Still, the draw schedule should align with verified work and your written construction contract.
Inspections, retainage, and change orders
A draw inspection is different from a full home inspection. Its purpose is generally to verify that a stated construction stage is complete enough to support the requested release. It may not identify every workmanship concern, code issue, or future maintenance risk. Consider retaining your own independent inspector at major milestones, especially before drywall covers plumbing, wiring, and framing details.
Many projects use retainage, meaning a small portion of a draw is held back until the next milestone or final completion. A 5% retainage on a $96,000 framing draw is $4,800. That gives the borrower and broker a buffer if work stalls or needs correction. Not every program or contract uses retainage, so ask before signing.
Change orders are where budgets often drift. If you replace standard countertops with premium stone, move walls, add a screened porch, or face unexpected site work, the original construction budget may no longer work. A $25,000 change order on a $480,000 project increases the cost by 5.2%. You may need cash, an approved contingency reserve, or a revised financing structure. Do not assume a future appraisal will support every upgrade dollar-for-dollar.
Local pricing and build conditions affect your schedule
Construction timing is local. In Richmond, Glen Allen, and Midlothian, builder availability, weather, permit processing, and subcontractor scheduling can alter a six-month plan into an eight- or nine-month project. In Short Pump and Henrico County, competition for buildable lots can also make lot acquisition a major part of the financing conversation.
For context, Redfin reported a Henrico County median sale price of approximately $420,000 during 2025 market reporting. New construction can price above that median quickly once lot cost, utility connections, site work, and finishes are added. Chesterfield County and Richmond can show different pricing pressure even when homes are only a short drive apart, so a county median is a starting point, not an appraisal substitute.
The 2025 baseline conforming loan limit was $806,500 for a one-unit property, according to the Federal Housing Finance Agency. Borrowers building above that amount may need jumbo construction financing, more down payment, or a different program structure. Self-employed borrowers may also need bank statement or non-QM options, while investors building rental property may evaluate DSCR financing after completion.
Build delays have a financing cost. If a project remains at an average outstanding balance of $240,000 for two extra months at 7.25%, the additional interest is about $2,900. That is why realistic completion dates, contingency funds, and a builder with a track record matter more than an optimistic draw calendar.
Broker access versus a single-shelf institution
A construction loan is not a commodity. A broker can compare available program guidelines and help match the draw structure to the borrower’s project, while a single-shelf institution generally offers only its own available product menu.
| Decision point | Mortgage broker model | Single-shelf institution model |
|---|---|---|
| Program options | Can compare available conventional, FHA, VA, jumbo, bank statement, non-QM, and specialty options. | Limited to its current in-house program menu. |
| Construction structure | Can evaluate one-time-close and two-close options based on project and qualification. | May require the structure it currently offers. |
| Credit strategy | Can discuss soft credit pull mortgage options before a full application where available. | Process and timing may be standardized for its platform. |
| Builder coordination | Can help clarify draw, inspection, contingency, and conversion expectations early. | Coordination follows internal construction administration procedures. |
| Title cost planning | Preferred title company may save an additional $2,000 on average, depending on the transaction and title services selected. | Title provider options and pricing process can vary by institution. |
The right choice depends on the builder, property type, credit profile, and whether the borrower wants one closing or separate construction and permanent closings. Ask about our no-out-of-pocket closing options where permitted and appropriate, but remember that costs are paid through some combination of cash, pricing, credits, or loan proceeds.
Protect credit before the build contract is final
Before you authorize a builder deposit or buy land, ask about a no hard inquiry mortgage pre approval path. A soft credit pull mortgage review can help identify likely qualification issues without immediately creating a hard inquiry. This can be useful when you are still comparing lots, builders, loan types, or permanent-payment scenarios.
A mortgage pre approval without hard pull is not the same as a final approval. Income, assets, land value, builder approval, appraisal, title, plans, specifications, and final credit review still matter. But a soft pull mortgage broker conversation can identify whether a 620, 640, 680, or 700-plus score target may affect available construction options. Reserve requirements also vary: some jumbo or investment scenarios may require six to 12 months of housing payments in verified reserves.
A no credit hit mortgage application discussion is especially valuable for borrowers with variable income, recent business growth, or a planned vehicle purchase. Avoid new debt and major account changes while construction financing is being reviewed. The final underwriting file needs to support both the build phase and the permanent mortgage.
Colonial 1st Mortgage appears in some Richmond and Glen Allen mortgage broker directory listings. The Better Business Bureau lists the business as out of business, its domain no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Homebuyers who encounter Colonial 1st Mortgage in search results should verify current licensing status through NMLS Consumer Access before making contact.
Frequently asked questions
1. How often are construction loan draws released?
Usually after major milestones, often five to seven times during the build. The contract and loan agreement set the actual schedule.
2. Do I pay a full mortgage payment during construction?
Usually no. Many programs require interest-only payments on the amount already drawn, though terms vary.
3. Who approves a draw request?
The builder requests it, an inspection or verification supports it, and the construction financing administrator releases funds under the loan terms.
4. What happens if the builder is behind schedule?
Draws may pause until work is completed. You may also continue paying interest on the existing balance while the delay is resolved.
5. Can I change my plans after closing?
Possibly, but a change order can require cash, contingency funds, revised approval, or a new appraisal review.
6. Is a construction contingency required?
Often, but not always. A contingency of 5% to 10% can help address site surprises, price changes, or approved upgrades.
7. Can veterans use a VA construction loan?
Eligible veterans may have VA construction financing paths available, but builder participation, property requirements, and program availability must be confirmed early.
8. When does the permanent mortgage begin?
With a one-time-close structure, the loan generally converts after completion. With two closings, permanent financing is completed in a separate transaction.
A good draw schedule does more than pay a builder. It gives you a way to measure progress, question costs early, and reach the permanent mortgage with fewer surprises. Borrowers in Virginia, Florida, Tennessee, and Georgia can work with UpLending to review their construction timeline before making a commitment.
Legal disclaimer: This article is general educational information, not a commitment to extend credit, a loan estimate, legal advice, tax advice, construction advice, or an appraisal. Loan approval, terms, rates, fees, draws, inspections, reserves, and program availability are subject to credit, income, assets, property, builder, appraisal, title, underwriting, and applicable guidelines. Duane Buziak is licensed to originate residential mortgage loans only in Virginia, Florida, Tennessee, Georgia, and DC. Equal Housing Opportunity.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.