Construction reserve funds, if any, will be withheld from the initial funding of the loan. The Borrower will be required to provide a detailed scope of work for Lender’s review prior to origination of the loan.
This scope of work will be included in the loan documents. Borrower understands, acknowledges and agrees that Lender will not disburse funds in excess of the construction reserve amount.
If excess funds beyond those in the construction reserve are required to complete work items included in the scope of work, Borrower shall be solely responsible for supplying such additional funds.
Borrower is also solely responsible for supplying funds for unexpected expenses or costs incurred that are not included in the scope of work.
Work item(s) must be completed prior to disbursal of corresponding draw amount. For avoidance of doubt, work items shall consist only of actual costs toward improvements to the property and shall not include any overhead of Borrower, Lender’s interest, property taxes, property insurance, HOA dues and other costs which do not constitute improvements.
Upon each draw request, Borrower shall be responsible for payment of any third-party costs to review the course of completion of the work items for Lender’s assessment of the actual completion of work items relative to the disbursement schedule and Borrower’s requested draw amount.
The minimum amount of each draw request shall be equal to the greater of $5,000 and 10% of the total construction reserve.
Borrower understands, acknowledges and agrees that each draw disbursed by lender shall be a percent, equal to the Lender-approved loan-to-cost ratio (construction reserve funds / Lender approved budget for the scope of work), of the total amount of funds actually spent by Borrower on the work items and evidenced in the draw request, and approved by Lender in its sole and absolute discretion.
Borrower understands, acknowledges and agrees that Borrower must have the necessary funds from Borrower’s own resources to fund the difference in actual costs in excess of loan funds advanced, if any, by Lender toward the work items. This includes paying for work items in advance of Borrower’s receipt of loan funds advanced, if any, by Lender toward the work items.