Rehab Costs Budget question

[Andrae Warren]

Good afternoon,

I am in the process of purchasing a home which requires a rehab/repair budget.  The lender will be doing a holdback of the budgeted amount, and I am curious as to how this process will work in terms of actually paying the vendor for services completed?

My repair budget has different Draws timelines for me to chose, but I am unsure if I only need one draw or multiple draws.  The Vendor requires a deposit to start work which means I would either be fronting the money upfront then looking to get reimbursed later, or will the lender provide the money upfront to get started.  Most things I have read say that lenders usually send someone out to inspect work completed and release funds only after it has been approved.  Can someone provide clarity here?  I have done several deals where I just do the work myself outside of closing, but this is the first one that I am doing using a repair budget.  Any information provided would be greatly appreciated. 

Thanks in advance,

[Scott E.]

I have worked with several private and hard money lenders who offer loans like this, and the draw process varies quite a bit from one lender to the next.

In general, you'll need to front the first payment to your contractor, then get reimbursed by your lender via a draw request.

But you need to talk with your lender about these details. They are the only ones who can tell you exactly how this loan you were approved for will function.