First draw
Our loan was approved…now how do we access the money?
This question took 18 days to fully resolve. Here’s the timeline:
August 1: Our builder needs approximately $37k for a 50% down payment on windows and rear exterior doors. He’s never worked with our lender before, so he emails the banker who put together the loan. The banker directs him to a loan management company who will serve as the disbursing agent. Our builder fills out all paperwork and sends it to us to sign.
August 2: A liaison from the bank emails our builder to inform him that our account is not yet fully set up. The bank has 10 business days from when the loan closes (in our case, July 21) to complete the process and generate a welcome package. It’s currently Day 8.
August 4: Forms are submitted. Loan management company sends email stating they need a copy of the building permits and receipts for $18k worth of prepayments prior to processing the withdrawal. After a call to the loan management company, I figure out which prepayments need proof of payment - there were, after all, a lot of prepayments - and I pass these along. Our builder emails the permits.
August 8: The loan management company emails the builder and asks what line item they should use for the prepaid items (which turned out to be the permit fees, minus the school district fees, plus the deposit to the builder). For reference, the construction budget that we submitted as part of our loan application looks like this:
Permit fees are usually included as a line item in a construction budget. However, since I had already paid these directly, they weren’t included in our loan.
August 9: I email the loan management company and relay the information above. They respond saying that they cannot move forward with the draw until I tell them which line to use for the prepaid items. This is, apparently, per lender policy. At this point, I am stumped, because there is no line for prepaid items. As I am drafting an email to the banker, the loan management company asks if I would like the prepaid items to be applied outside of the contract as an information-only line? Yes, yes I would.
August 11: Loan management company and lender get together and agree to the above. The form is updated for submission. The loan management company also informs builder that the total line needs to be completed, even though this draw consists of exactly one line item. Builder updates form and resubmits.
August 14: Loan management company sends email stating that all forms have been reviewed and forwarded to lender.
August 16: Lender sends email saying that request is approved and prepares wire transfer to builder.
August 17: Our mortgage portal is updated to reflect current mortgage, which is now the sum of original mortgage plus the $37k we just withdrew.
August 18: Transfer clears. Builder pays windows/doors deposit.
I think this is a great example of how extra time gets added to a construction project. We’re lucky that everyone involved was so responsive; if that hadn’t been the case, this might have dragged on for much longer. Still, we ended up ordering our windows a couple of weeks later than we would have preferred. But now we know how the system works!
