A construction loan does not work like a standard mortgage. Instead of receiving the full loan amount at closing, the funds are released in stages — called draws — as construction progresses. The draw schedule is the document that controls when those funds are released, how much is released at each stage, and what inspections or milestones must be verified before the lender writes the check.
Understanding the draw schedule before you close is not optional. It determines your builder's cash flow, your interest-only payment during construction, and whether the project can move at the pace your builder needs. Surprises in the draw process — delayed inspections, disputed completion percentages, or held draws — are one of the most common sources of friction in Arizona construction projects.
How Construction Loan Draws Work
At each draw milestone, the builder submits a draw request to the lender. The lender then orders an inspection — typically performed by a third-party inspector — to verify that the work described in the draw request has actually been completed. Once the inspection confirms completion, the lender releases the funds, usually within a few business days.
During the construction period, you pay interest only on the amount that has been drawn — not on the full loan amount. This means your monthly payment starts small and grows as more funds are released. On a $900,000 construction loan, your first draw of $100,000 at a 7% rate generates an interest-only payment of roughly $583 per month. By the time the full amount is drawn, that payment is closer to $5,250 per month — before the loan converts to a permanent mortgage.
Typical Arizona Draw Schedule
Most Arizona construction loans use a 5–6 draw structure tied to defined construction milestones. The exact percentages vary by lender and project, but the sequence is consistent.
Draw 1 — Foundation
10–15%Trigger: Foundation poured and inspected
Includes site prep, excavation, footings, and slab or stem wall. In Arizona, caliche layers can add cost and time at this stage.
Draw 2 — Framing
20–25%Trigger: Framing complete, roof sheathing on
Largest single draw in most builds. Includes exterior walls, roof structure, and rough openings for windows and doors.
Draw 3 — Rough-In
15–20%Trigger: Mechanical, electrical, and plumbing rough-in complete
HVAC, electrical panels, and plumbing lines are in the walls before drywall. Inspector verifies rough-in before draw is released.
Draw 4 — Drywall / Insulation
10–15%Trigger: Insulation and drywall hung
Includes insulation, drywall hanging and taping. In Arizona's climate, proper attic insulation and radiant barriers are critical at this stage.
Draw 5 — Interior Finish
15–20%Trigger: Flooring, cabinets, trim, and fixtures installed
The most visible phase. Selections made before the loan closed are verified against the description of materials.
Draw 6 — Completion / Certificate of Occupancy
10–15%Trigger: Final inspection passed, CO issued
Final draw is held until the county issues a Certificate of Occupancy. Loan converts to permanent financing at this stage.
Arizona-Specific Draw Considerations
Arizona's construction environment creates a few draw-specific issues that borrowers in other states do not face.
Caliche and foundation delays. Caliche — the calcium carbonate hardpan layer common throughout Maricopa and Pima counties — can require additional excavation, blasting, or engineered fill. This adds cost and time to the foundation phase, which can delay the first draw and compress the overall construction timeline.
Summer construction pace. Arizona's summer heat (June–September) slows exterior work, concrete pours, and framing. Builders typically front-load exterior work before summer and shift to interior finish work during the hottest months. A well-structured draw schedule accounts for this seasonal rhythm rather than assuming a linear pace.
County permit and inspection timelines. Maricopa County and Pima County have different inspection scheduling processes. In some jurisdictions, inspection wait times can run 5–10 business days, which can delay draw releases if not anticipated. Building in a city with its own inspection department (Phoenix, Scottsdale, Chandler) versus unincorporated county land can also affect timing.
Lien waivers. Arizona is a lien waiver state. Most lenders require the builder and major subcontractors to provide conditional or unconditional lien waivers at each draw to confirm that suppliers and subs have been paid. Missing lien waivers are one of the most common reasons draws are held up.
What Happens at Loan Conversion
On a single-close construction-to-permanent loan — the structure used in the Arizona program on this site — the loan automatically converts to a permanent mortgage when the Certificate of Occupancy is issued. There is no second closing, no new appraisal, and no new set of closing costs. The rate you locked before groundbreak is the rate on your permanent mortgage.
The final draw is typically held until the CO is issued and the final inspection is complete. Once conversion occurs, your interest-only construction payments become a standard principal-and-interest payment on the permanent loan.
Want to see how the draw schedule would work on your specific project? We can walk through the timeline, interest-only payment estimates, and conversion structure before you commit to a builder contract.
Talk to MatthewFrequently Asked Questions
How many draws are typical for an Arizona construction loan?
Most Arizona construction loans use 5–6 draws tied to defined milestones: foundation, framing, rough-in, drywall/insulation, interior finish, and final completion/CO. Some lenders allow additional draws for larger or more complex projects.
Who orders the draw inspections?
The lender orders the inspection through a third-party inspector, not the county building department. The lender's inspector verifies the percentage of completion at each draw stage. This is separate from the county's building inspections, which are required for permit compliance.
What happens if my builder runs out of money between draws?
This is a serious risk on cost-plus contracts and on projects where the builder is undercapitalized. The draw schedule is designed to reimburse completed work, not to pre-fund future work. If your builder cannot carry the cost between draws, that is a sign of a cash flow problem that should be addressed before you close the loan.
Can I request a draw early if my builder needs the money faster?
Draws are tied to completion milestones, not to the builder's cash needs. You can request a draw inspection at any time, but the lender will only release funds for work that has actually been completed and verified. Requesting an inspection before the milestone is complete will result in a partial draw or a held draw.
What are lien waivers and why do I need them?
A lien waiver is a document signed by the builder or subcontractor confirming that they have been paid for work completed to date and waiving their right to file a mechanic's lien against the property for that amount. Arizona law allows contractors and suppliers to place liens on property for unpaid work, so lenders require lien waivers at each draw to protect the borrower and the lender's security interest.