Construction Loans and Draw Schedules in Florida, From a Distance

Paying for a Florida Build From a Distance

On a custom build, you don’t pay for the house all at once. Money goes out in stages, called draws, as the work gets done. Who checks that the work is really done before money moves is one of the biggest questions for an owner who lives out of state. This guide explains how construction loans and draws work in Florida, and how to keep control of the money when you can’t see the site. It’s part four of our series on building a Florida home from out of state.

Short version: Most lot-and-build projects are financed with either a single-closing construction-to-permanent loan or a two-step setup, a construction loan followed by a separate mortgage. Under Fannie Mae’s rules for construction-to-permanent loans, you must hold title to the lot, though you can buy it as part of the transaction. During construction, the lender releases money in draws tied to completed stages. Before each draw, the lender typically sends an inspector to confirm the work is in place. That inspection confirms progress, not quality, so hire your own inspector for key stages. In Florida, the lender must record the Notice of Commencement before disbursing. If it pays loan money to you directly, it must warn you in writing to get lien releases. Paying cash? Have a title company or escrow agent handle draws. Never wire money based on emailed instructions without calling a number you already trust.

One closing or two?

	Single-closing (construction-to-permanent)	Two-closing
How it works	One loan covers construction, then converts to a regular mortgage when the home is done	A short-term construction loan, paid off by a new mortgage at completion
Closings	One, at the start	Two: one before construction, one after
Remote advantage	Fewer signings and less paperwork from a distance	More flexibility to shop for your permanent loan later
Risk to watch	Terms are set early, so read the conversion rules carefully	You have to qualify again at the end, and rates may change
Florida closing taxes	Paid on one mortgage	Each new mortgage and note is taxed, so you may pay twice

Florida charges documentary stamp tax of 35 cents per $100 on notes and mortgages (Section 201.08), plus a 0.2% intangible tax on mortgage-secured debt (Section 199.133). See Florida closing costs.

Construction loans usually charge interest only on the money drawn so far, so payments start small and grow as the house goes up. Ask your lender exactly how interest, rate locks, and any interest reserve work, and what happens if the build runs past the construction period. Not every lender offers construction lending, so start early. See mortgage and financing basics for the broader picture.

How a draw works

The builder requests a draw when a stage on the draw schedule is done, such as the foundation, framing and dry-in, rough-ins, drywall, trim, or final.
Someone confirms the work is in place. With a loan, that’s usually the lender’s draw inspector. Paying cash, it’s whoever you hire.
Lien waivers are collected from the contractor and from any sub or supplier who sent you a Notice to Owner. See protecting yourself from construction liens.
You approve the draw, often by e-signature.
Funds are released, usually to the contractor, sometimes by joint check to the contractor and a supplier.

The lender’s draw inspection protects the lender’s collateral. It checks that work matching the draw is there, not whether it’s built well. That’s why many remote owners also hire their own licensed home inspector or engineer for key stages, such as the foundation, framing before insulation, and the final. See overseeing the build remotely.

Florida rules that touch draws

Notice of Commencement first (713.13): a construction lender must record the Notice of Commencement before disbursing any construction funds, and it designates itself to receive copies of notices to owner.
Warning when money goes to you (713.3471(1)): if a lender disburses residential construction funds directly to you, or jointly to you and someone else, it must first give you a written warning in large bold type to require lien releases from your contractor each time you pay.
If the lender stops funding (713.3471(2)): a lender that decides to stop advances before all funds are paid out must notify the contractor, and any lienor that notified the lender, in writing within 5 business days.

Paying cash? Don’t be your own bank

Cash buyers skip the lender’s draw process, but they also lose its checks. A common fix is to have a title company or escrow agent hold the construction money and release each draw only after your inspector confirms progress and the lien waivers are in. If you do pay directly, use the same steps a lender would: confirm the work, collect waivers, then pay the company, never an individual.

Setting up a draw schedule that protects you

Tie draws to milestones, not dates. “Roof dried in” is checkable. “Month three” isn’t.
Avoid front-loading. If early draws are much larger than the work they cover, you’re paying ahead, and you have less leverage if the job stalls.
Keep a holdback for the end. Many contracts hold back part of the price until final completion, the certificate of occupancy, and the punch list. Agree on it in the contract. See closing out and moving in.
Plan for change orders and overruns. Decide how approved changes get paid, and keep a contingency. Loan funds are usually set at closing, so extra costs may have to come from your own pocket.
Get a package with every draw: photos or video of the completed stage, the inspection report, an updated budget showing the cost to finish, and the lien waivers.

Wire fraud: the remote buyer’s biggest money risk

When everything happens by email, scammers have more chances to pose as your title company, lender, or builder and send fake wiring instructions. The Consumer Financial Protection Bureau recommends:

Agree on the payment process with your trusted contacts early, by phone or in person, not email.
Confirm wiring details by calling a number you already have, not one from the message.
Never follow wiring instructions that come only by email, especially “updated” ones.
If you’re scammed, call your bank right away to request a wire recall, and file a complaint with the FBI’s Internet Crime Complaint Center at ic3.gov.

Red flags in draw requests

A draw requested for work that the photos or inspection don’t show
Missing or late lien waivers, or waivers that only cover the contractor
Budget lines running over early in the job
Requests to pay a sub or supplier directly in cash, or to a personal account
Pressure to approve quickly “so the crew doesn’t leave”

For budgeting the whole project, see the cost to build a house in Central Florida and the hidden costs of building. For choosing and contracting with the builder, see vetting and hiring a Florida builder remotely.

Frequently Asked Questions

A payment released during construction when a stage of work is complete. With a loan, the lender usually confirms the work through an inspection and collects lien waivers before releasing the money.

A one-time close loan covers construction and converts to a mortgage with a single closing. A two-time close uses a construction loan, then a separate mortgage at completion. That means two closings, and in Florida, closing taxes on each new mortgage.

Generally no. It confirms that work matching the draw is in place to protect the lender. For quality, hire your own licensed home inspector or engineer for key stages.

Many cash buyers use a title company or escrow agent to hold the funds and release each draw after an inspection and lien waivers. Pay the company, not individuals, and confirm any wiring instructions by phone.

Confirm every set of wiring instructions by calling a number you already have, never follow emailed changes, and if you’re scammed, contact your bank immediately and report it at ic3.gov.

Sources

This article is for general informational purposes only and isn’t financial, legal, insurance, or tax advice – for guidance specific to your situation, talk to a licensed professional.