How Do Construction and Rehab Draws Actually Work?

Short answer: Rehab and construction budgets are released in stages, called draws, as work is actually completed and verified — not all at once at closing.

The typical draw process

1. You request a draw. Once a phase of work is done, you submit a draw request (usually through the lender’s online portal).
2. An inspector visits the property. A third-party inspector reviews the budget line items against the completed work and files a report.
3. The lender reviews the report. Once approved, you’ll get confirmation of the amount approved for disbursement.
4. Funds are wired to you. Disbursement is typically wired directly to your designated account within a few business days of approval.

How the amount of each draw gets calculated

• Draws are paid based on the percentage of work completed for each line item in your approved budget — not a flat percentage of the whole loan.
• Materials are generally only paid for once they’re installed, not when they’re purchased or delivered to the site. No credit is given for materials sitting on-site unused.
• Inspection, wire, and/or title fees are typically deducted from each draw.
• Your loan payments (and taxes/insurance, if escrowed) generally need to be current before a draw will be disbursed.

The final holdback

Most programs hold back the last portion of the construction or rehab budget — commonly the final 10% — until the project is fully complete. Releasing it typically requires a clear title search (showing no mechanic’s or materialmen’s liens), a Certificate of Occupancy if applicable, and a final lien waiver.

What can slow a draw down

• Delaying scheduling the inspection
• Missing documentation from you or your contractor
• Site access issues for the inspector
• Weather delays

Bottom line

Draws exist to protect both you and the lender — funds follow verified progress, not promises. Budgeting your project with realistic phases and keeping documentation ready speeds up every draw after the first.

Have questions about how draws would work on your specific project? Get in touch.