How your contractor gets paid.

With the FHA Construction loan your contractor will only be paid as work is completed. This process is called is called a "draw". 


It starts with your contractor contacting the lender to let them know that work has been completed. The lender will then send out an inspector to confirm that the work was done. The local building inspector may also inspect the work to make sure it is up to the local building code.


As the inspection process is in the works your contractor should also be in touch with the title company. They will have to fill out documents call a sworn statement and waivers of lien. These documents allow the title company to keep a running tally of who has been paid and who hasn't. It the title company's job to make sure all the contractors and suppliers get paid.


Once the job is completed, the certificate of occupancy issued and everyone has been paid, the title company will issue their final endorsement. This will allow you to do your modification to your end loan.




 


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