What are the home improvement loan terms?

What is a draw request?

The process by which a borrower goes through to “draw” upon available funds, up to a limit. 

What is a draw period?

The fixed amount of time during which a borrower can “draw” upon available funds. 

What is a draw inspection?

The lender will hire an inspector to visit the construction and evaluate progress. The inspector will be looking to compare the project’s progress with its timeline, checking the accuracy compared to the original draw request, and reviewing the budget.

What is interest rate?

An interest rate is the amount a lender charges a borrower, and is a percentage of the principal, or the amount loaned. Interest total is based on drawn amounts that have been advanced, not on the total approved loan amount. 

What is prime rate?

The lowest rate of interest at which money may be borrowed commercially.

What is subject to completion appraisal value

A “subject to” appraisal the value of the property based on what the home will be worth upon completion of the proposed update. This type of appraisal helps you evaluate the home after the improvements have been made. 

Debt to income ratio

A debt-to-income ratio (DTI) is a comparison of how much you owe each month (debt) to how much you earn (income). More specifically, it’s the percentage of your gross monthly income that goes towards regular payments like rent, mortgage, or credit cards.