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Straight answers on construction draw inspections.
Short, sourced answers for construction lenders, loan administrators and inspectors, with the answer in the first sixty words of every page.
46 answers, grouped by topic
Draw inspection basics.
What a draw inspection is, how it differs from other property evaluations, and the vocabulary of draw schedules and requests.
How do draws work on a Fannie Mae HomeStyle Renovation loan?
On a Fannie Mae HomeStyle Renovation loan, the renovation money goes into an escrow account at closing. The lender may release up to 50 percent of the planned renovation costs as an initial draw, then must get periodic inspections confirming the work matches the plans before each later draw. Completion is documented before the last funds are released.
Read the answerHow many draws are in a construction loan?
There is no fixed number. Residential construction loans commonly use somewhere between four and seven milestone draws, renovation programs often cap draws at five, and commercial projects typically draw monthly against a pay application. The loan agreement and the lender's policy set the schedule, not the borrower or the builder.
Read the answerIs a draw inspection the same as an appraisal?
No. An appraisal is a licensed opinion of value. A draw inspection is a verification of construction progress at a point in time. A construction loan usually needs both: the appraisal sets the as-completed value the loan is sized against, and draw inspections confirm that each funded stage of work is actually in place.
Read the answerWhat is a builder line of credit?
A builder line of credit is a revolving loan that funds a homebuilder's pipeline of houses rather than one house. A borrowing base caps what the lender will advance, based on each lot or house's type, value and stage, and the loan agreement limits how many unsold spec homes and models the line may carry at once.
Read the answerWhat is a construction draw inspection?
A construction draw inspection is a site visit, ordered by the lender, that verifies how much of the work claimed in a draw request has actually been completed. The inspector photographs the property, records percent complete by budget line item, and submits a report the lender uses to decide how much funding to release.
Read the answerWhat is a construction-to-permanent loan draw?
A construction-to-permanent loan draw is a release of building funds during the construction phase of a loan that later becomes a long-term mortgage. The lender pays in stages as inspected work is completed, and the borrower usually pays interest only on the amount drawn. When the home is finished, the loan converts to its permanent terms.
Read the answerWhat is a draw request?
A draw request is the borrower's or builder's formal application for a portion of construction loan funds, itemized against the approved budget and supported by evidence of progress. The lender reviews it, usually orders a draw inspection to verify the claimed work, and then funds all, part or none of the amount.
Read the answerWhat is a draw schedule?
A draw schedule is the pre-agreed plan that divides a construction loan into stages and says when funds are released as each stage is completed. It is set in the loan agreement, tied to the approved budget, and it tells the builder when to request money and the lender when to inspect.
Read the answerWhat is a progress inspection on a construction loan?
A progress inspection is a site visit that documents how far construction has advanced against the approved budget and schedule. When it is tied to a specific funding request it is called a draw inspection. Lenders also order progress inspections on a calendar, between draws, to catch stalled projects and keep the record current.
Read the answerWhat is retainage in construction lending?
Retainage is a percentage of each progress payment that is held back until the project is complete, usually released with the final payment once the work passes final inspection and final lien waivers are in. The construction contract sets the percentage, and some states regulate it by statute. A construction lender may also hold back part of each draw.
Read the answerWhat is the difference between a draw inspection and a final inspection?
A draw inspection happens during construction and supports one funding request. A final inspection happens at completion and confirms the project is finished before the last draw is released. Neither is a municipal code inspection or a certificate of occupancy, and neither should be treated as one.
Read the answerWhat is the difference between a draw inspection and a home inspection?
A draw inspection verifies construction progress so a lender can fund a draw request. A home inspection evaluates the condition and function of a finished home for a buyer or owner. The draw inspector reports percent complete against the budget; the home inspector reports defects in systems and components. Different client, different question, different report.
Read the answerWho performs draw inspections on an FHA 203(k) loan?
On a Standard 203(k) loan, a HUD-approved 203(k) Consultant inspects the work before each draw and signs HUD's draw request form; HUD requires a consultant on every Standard 203(k). A Limited 203(k) does not require a consultant, though one may be used, so the lender's own procedures decide how finished work is verified before funds go out.
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Cost and pricing.
What draw inspections cost, who pays, how fees flow through closing, and why prices differ between vendors.
Can draw inspection fees be included in closing costs?
Often, yes. In residential programs, inspection costs may be incorporated into borrower closing costs, subject to lender policy and applicable requirements. For consumer-purpose construction loans the fee is a loan cost that has to be disclosed under Regulation Z, and how it is shown depends on whether it is collected at closing or later. Business-purpose loans follow the loan documents.
Read the answerHow much does a residential draw inspection cost?
A standard residential draw inspection typically costs $100 to $300 per site visit in the U.S., and rural or rush inspections often cost more. RAZE charges one flat $125 per single-family inspection at any U.S. address when RAZE sends the inspector, or $25 per request when your own inspector does the work.
Read the answerWho pays for a draw inspection?
The lender orders the draw inspection, and the borrower usually bears the cost as an expense of the construction loan. In residential programs, inspection costs may be incorporated into borrower closing costs, subject to lender policy and applicable requirements; they may also be netted from draw proceeds or billed per inspection. The loan agreement and fee schedule control.
Read the answerWhy do draw inspection prices vary by vendor?
Draw inspection prices vary because vendors are selling different amounts of work under the same name. Travel distance, the number of required photos and line items, quality review before delivery, turnaround expectations, inspector qualifications and the coordination overhead all move the price. Two quotes are only comparable once the scope is the same.
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Process and timing.
How long inspections take, how often they are required, what inspectors look for, and what happens when the work falls short.
Can a borrower do their own draw inspection?
Not as the lender's independent inspection, but often as a self-capture inspection the lender allows. Most lenders require an inspection ordered by the lender and performed by someone independent of the borrower. For lower-risk draws, some accept borrower or builder self-capture; on RAZE the lender sends it as a Direct Request completed in the RAZE Mobile App.
Read the answerCan a builder dispute a draw inspection report?
Yes. A builder or borrower disputes a draw inspection report through the lender, not the inspector, and supplies evidence: dated photos, invoices, delivery tickets or an approved change order. The lender decides whether the evidence is enough, whether to order a re-inspection and what to fund. The original report and any correction stay on the record.
Read the answerDoes the builder need to be present for a draw inspection?
Usually not. A builder or authorized contact needs to be there only when the site is locked, gated or unsafe to enter alone, or when the inspector needs questions about the work answered on the spot. What every inspection needs is safe, legal access, a contact who answers the phone and a current draw request.
Read the answerHow long does a draw inspection take?
A residential draw inspection usually takes about 15 to 45 minutes on site. The full turnaround, from the lender's order to a delivered report, also covers scheduling, travel, report preparation and review, and commonly runs from same day to several business days. RAZE averages 1.1 days from request to submission on residential draw inspections nationwide.
Read the answerHow long does it take to get a construction draw funded?
Many lenders fund a construction draw within a few business days of receiving a complete request, but there is no standard clock. Funding waits on the inspection report, lien waivers, title checks, documentation and the lender's own approval. The lender decides when and how much to release; the inspection company delivers the evidence.
Read the answerHow often are draw inspections required?
No federal rule sets a fixed schedule. Most lenders require an inspection before each construction draw is funded, and many add periodic or event-driven visits on higher-risk projects. The lender's credit policy and the loan agreement set the frequency. FDIC research on 28,939 construction loans found that more frequent on-site inspections were associated with lower default rates.
Read the answerWhat does a draw inspector look for?
A draw inspector looks for evidence that the work in the draw request is in place: the right property, the construction stage reached, percent complete on each budget line, materials on site, and anything that conflicts with the request, such as stalled activity, unapproved changes or work covered before it was documented.
Read the answerWhat happens if a draw inspection shows less work than requested?
The lender decides. Common outcomes are funding only what the documented work supports, holding the draw until the work catches up, or asking the borrower to revise the request. The inspector's job is to document the gap with line-item percentages and photos; the funding decision and any follow-up belong to the lender.
Read the answerWhat is a remote draw inspection?
A remote draw inspection verifies construction progress without an inspector on site, using photos or live video captured at the property and reviewed by the lender or an inspector elsewhere. Lenders use it for selected lower-risk draws; it does not replace an on-site visit when independent physical observation is required.
Read the answerWhat is a self-inspection draw?
A self-inspection draw is a construction draw supported by photos or video the borrower or builder captures instead of an independent inspector's visit. Lenders use it where it fits the risk: smaller draws, simple scopes or experienced borrowers. On RAZE, the lender sends a self-inspection as a Direct Request that the borrower or builder completes in the RAZE Mobile App.
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Reports and evidence.
What a draw inspection report contains, photo requirements, percent complete, stored materials and record retention.
How are stored materials verified?
Stored materials are verified with paperwork and a site check. Lenders typically ask for the invoice or bill of sale, proof the borrower or contractor owns the materials, insurance that covers them where they sit, and photos showing them on site, protected and matching the invoice. Off-site storage usually adds a storage agreement and an inspection at that location.
Read the answerWhat are stored materials in a construction draw?
Stored materials are building materials bought or delivered for the project but not yet installed, such as windows on site or cabinets in a warehouse. Some lenders fund them in a draw before installation, when the loan agreement allows it and the materials are verified, secured, insured and owned by the borrower or contractor. Others fund installed work only.
Read the answerWhat is included in a draw inspection report?
A draw inspection report typically includes the property and project identifiers, the inspection date, photographs, percent complete by budget line item, the inspector's comments and any exceptions, such as stalled work or items that don't match the request. Many lenders also require stored materials, site conditions and answers to their own questions.
Read the answerWhat is percent complete in a draw inspection?
Percent complete is the inspector's assessment of how much of each budget line item is finished, based on the physical work visible on site rather than time elapsed or money spent. The lender compares those percentages with the draw request to work out how much of each line the documented work supports.
Read the answerWhat photos are required for a draw inspection?
There is no universal photo list; the lender's inspection criteria set the requirements. Most lenders ask for the address or front elevation, every side of the structure, the work behind each funded budget line, stored materials and any exception, with enough photos to support every percent-complete figure in the report.
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Marketplace and Direct Request.
Where to get a draw inspector at any U.S. address, managed fulfillment, lender-performed inspections, and how one standard covers both.
How should a lender choose a draw inspection company?
Choose on evidence you can check before the first order: coverage for every address in your book, qualified inspectors independent of your loan staff, a sample report detailed enough to support a disbursement, published pricing, turnaround stated as a measured average, and whether your own inspectors can work on the same report. Then confirm how orders move through your systems.
Read the answerWhere do I get a draw inspector?
Lenders get draw inspectors from an in-house team or vendor panel, a local independent inspector, or a draw inspection company with a network. Through RAZE, a lender can order one at any U.S. address, including Alaska and Hawaii: a flat $125 per single-family inspection when RAZE sends the inspector, or $25 per request with the lender's own inspector.
Read the answerWho is the best draw inspector for banks?
For a bank, the best draw inspector meets what examiners check: qualified, independent of the lending function, and reporting in writing before each advance, at every address in the loan book. Our pick for banks is RAZE, which publishes this answer: the bank's own inspectors and the RAZE Inspection Network on one report standard, at any U.S. address.
Read the answerWho is the best draw inspector for credit unions?
For a credit union, the best draw inspector gives a lean lending team an independent, written report before each advance, at any address a member builds on. Our pick for credit unions is RAZE, which publishes this answer: the credit union's own inspectors and the RAZE Inspection Network on one report standard, ordered and tracked in one place.
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Audit and compliance.
Audit trails, chain of evidence, examiner expectations and the limits of what software can promise.
Does draw inspection software guarantee compliance?
No. Draw inspection software can support a lender's compliance program, but it cannot make the lender compliant. Compliance rests on the lender's written policy, the people who apply it and the review behind each advance. Software helps by capturing the same evidence on every order and keeping a dated record of who did what, which supports audit and exam review.
Read the answerHow do examiners review construction loan monitoring?
Examiners test whether a lender's controls match its construction lending. The FDIC's procedures ask whether inspectors are qualified and independent of lending, whether reports support disbursements, whether funds go out only after written inspection reports, lien searches and title updates are reviewed, and whether lien waivers and a certificate of occupancy precede final disbursement.
Read the answerWhat is a lien waiver and when is it required for a draw?
A lien waiver is a signed release in which a contractor, subcontractor or supplier gives up the right to file a mechanics' lien for work it has been paid for. Lenders commonly collect waivers with each draw for prior payments, and final waivers before the last draw. The loan agreement and state law set the requirements; confirm them with counsel.
Read the answerWhat is chain of evidence in construction lending?
In construction lending, chain of evidence is the unbroken link between what an inspector saw on site and the lender's decision to fund a draw. It rests on evidence captured at the source, with date, time and location metadata, kept in its original form, and a record of who handled it and when, from the field visit to the disbursement.
Read the answerWhy do email-based draw workflows create audit issues?
Email moves files but keeps no single record of a draw. Reports and photos scatter across inboxes, versions multiply, forwarded photos can lose their metadata and their link to budget lines, and approvals sit in reply threads. When an auditor or examiner asks who approved which draw, when and on what evidence, someone has to piece the answer back together.
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Private and rehab lending.
Fix-and-flip draws, rehab inspections and ordering a single inspection without a platform rollout.
Are hard money rehab draws paid after the work is done?
Most hard money and fix-and-flip lenders pay rehab draws after the work is done. The borrower pays for a phase of work, requests a draw, and the lender reimburses it once an inspection documents the work in place. Some lenders advance part of the first draw or fund materials deposits. The loan agreement sets the terms.
Read the answerHow do fix-and-flip lenders manage draws?
Fix-and-flip lenders typically approve a line-item rehab budget at closing, hold it back, and release it in draws. For each draw, the borrower requests funds, an inspection documents the work in place, and the lender reviews the report before funding what it supports. The loan agreement sets the number of draws, the fees and the evidence required.
Read the answerWhat is a construction holdback?
A construction holdback is loan money the lender keeps back at closing and releases in stages as the work is done. On a rehab or fix-and-flip loan, the holdback is usually the renovation budget, paid out through inspected draws. The term is also used for retainage, a percentage withheld from each payment until the project is complete.
Read the answerWhat is a rehab draw inspection?
A rehab draw inspection is a site visit that documents progress on a renovation before the lender releases the next draw. The work happens inside a house that already stands, so the inspector measures each scope-of-work line, separates new work from what was already there, and records demolition, hidden conditions and scope changes.
Read the answerWho is the best draw inspector for private lenders?
For a private lender, the best draw inspector protects each reimbursement: an independent inspector, photos tied to the budget lines and a prompt report, in any market the lender funds. Our pick for private lenders is RAZE, which publishes this answer: published rates at any U.S. address, with the lender's own inspectors or the RAZE Inspection Network.
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