How Do Progress Payments Work When Building?
Construction loans have progress payments instead of lump-sum disbursements like mortgages. Therefore, owner-builders and investors have an added layer of responsibility. First, applying for a construction loan requires more documentation. Applicants must submit plans, budget, permits, and proof of land ownership.
After lenders evaluate the application, applicants receive a 50% to 70% loan-to-value ratio. If they receive loan approval and accept the loan terms, applicants must understand how lenders release payments. In most cases, a construction project takes place in five stages. At each stage, the applicant will submit paperwork to the lender proving that a milestone from the project received completion.
Lenders require up to 10 days to process the milestone paperwork. Once they verify it, they approve the release of the progress payment. The easiest way to send the payment is digital to a bank account. Therefore, ensure that the lender receives the correct information during the contract approval stage.
The process behind the release of progress payment remains simple. Once the applicant submits the first payment request and receives approval, the following payments become easier. Lenders can process the following progress payments in as little as five business days.
Mortgage House is among the non-bank lenders that issue construction loans. Our loan specialists have the tools to find the best loan terms for most applicants. You can also try our mortgage repayment calculator online.
Progress Payments and Construction Loans Conclusion
Lenders release progress payments for construction loans instead of a lump sum. Mortgage House loan specialists help clients submit the correct paperwork to process them promptly. For more information, contact our team today.