The term of your construction or rehabilitation loan begins the day you close. Construction should be completed within the term of your loan, specified in your commitment letter. Throughout the term of your loan, you can make requisitions on a regular basis.
A requisition is a detailed request for payment for the labor, materials and other construction costs associated with your project. Your lender will have specific forms you are required to use and deadlines by which you must submit them to be paid in a timely manner.
The requisition process continues throughout the life of your construction loan. Creating a construction timeline with your general contractor is key to ensuring there are no delays in payment or any ripple-effect delays in your project’s completion.
In addition to carrying out all site work, you will need to host third-party and lender site visits, conducted to ensure your project is proceeding on time, on budget and in compliance with code.
At the construction loan term’s end, you’ll need to pay off the full amount. This is done by obtaining a permanent mortgage to “take out” your construction loan. Prior to converting your construction loan to a permanent mortgage, you need to meet certain thresholds, including proving that construction has been completed, residents are in place and the project is cash flowing.