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Inspections of Construction Loan Sites

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Question: 
How often should our lenders be completing inspections of construction loan sites? Our policy states that we will complete monthly inspections, however from an efficiency/cost standpoint that seems extreme.
Answer: 

From the safety & soundness perspective, inspections should be tied to the builder's progress. The purpose of an inspection is to assure that the funds already advanced have been put to the intended use before you disburse more. In many cases, 4 draws and 3 inspections will get a single family dwelling built. The first draw is at loan closing or shortly thereafter. The second draw would occur after the site is prepared and the foundation completed. The third draw would be approved after the building is under roof. The final draw would depend of everything being roughed-in. As part of the construction loan agreement, builders are required to notify the lender when progress warrants each inspection.

First published on 03/12/2017

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