How Are Builders Paid During Construction?

Builders are typically paid through lender-controlled draws rather than receiving the full construction budget at closing. The builder requests funds as work reaches agreed milestones, and the lender or draw administrator reviews inspections, invoices, lien releases, and other required documents before releasing money.

What matters most

• The draw schedule should match the builder contract, project budget, and lender process.
• Retainage, inspection fees, change orders, and final completion documents can affect when funds are released.
• Unapproved work or budget changes may not be funded and can create a borrower cash requirement.

How to use this answer

Before signing the builder contract, confirm who manages draws, how often requests can be made, what inspections are required, and how long funding normally takes after approval. The builder must be willing and able to operate under that process.

A simple example

After the foundation is completed, the builder submits a draw request. An inspector confirms progress, the lender reviews the request and lien documentation, and an approved amount is released. The exact timing and milestone list come from the loan and construction agreements.

What to review before you decide

• Confirm the loan program, occupancy, property type, and timeline.
• Review the complete payment and cash-to-close estimate, not one number in isolation.
• Verify current program rules and lender requirements before moving money or signing a contract.