Construction Loan Agreement is an agreement between a lender, and a borrower. This
Construction Loan Agreement is a short term loan that provides for a purchase of
property, and construction of fixtures, structures, building and/or property
improvements. This agreement contains the standard terms and conditions used in this
type of agreement, but additional terms and conditions may be added to ensure the
needs of the contracting parties are met. This document is most useful for persons
wishing to borrow money for a construction project.
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT (“Loan Agreement”) dated
______________, _____, is made by and between:
________________________________________________________________
(“Borrower”) and _____________________________________________________ (“Lender”).
DEFINITIONS:
The following terms shall have the following meanings:
“Advance”: Lender’s advance of any part of the Loan under this Loan Agreement, or
Borrower’s endorsement and delivery of any Loan Proceeds check to a Contractor or a Supplier.
"Property”: the Real Property together with all improvements, all equipment, fixtures, and
other articles of personal property now or subsequently attached or affixed to the real property,
together with all accessions, parts, and additions to, all replacements of, and all substitutions for
any of such property, and all proceeds (including insurance proceeds and refunds of premiums)
from any sale or other disposition of such property.
“Security Instrument”: Mortgage, Open-end Mortgage, Deed of Trust, Credit Line Deed of
Trust or Trust Indenture) granting Lender a first second priority lien on the Property.
“Loan Documents”: the Note, the Security Instrument, and this Loan Agreement. All terms
defined in the Note and the Security Instrument shall have the same meaning in this Loan
Agreement.
The Parties hereby agree as follows:
1. LOAN.
The Loan shall be in an amount not to exceed the principal sum of U.S. $____________ and
shall bear interest on so much of the principal sum as shall be advanced pursuant to the terms of
this Agreement and the Loan Documents. The Loan shall bear interest on each Advance from the
date of the Advance in accordance with the terms of the Note. Borrower shall use the Loan
Funds solely for the payment of [Check the applicable option]
to purchase the real property described in Exhibit “A” to this Loan Agreement (“Property”);
To pay in full any outstanding liens on the Property;
to pay for labor and materials to construct certain improvements (“Improvements”) on the
Property (“Work”);
and if permitted by Lender, interest due under the Note, including all expenses and all loan and
commitment fees described in this Agreement. The Loan amount shall be subject at all times to
all maximum limits and conditions set forth in this Agreement or in any of the Related
Documents, including without limitation, any limits relating to loan to value ratios and
acquisition and Project costs.
2. FEES AND EXPENSES.
Whether or not the Work shall be consummated, Borrower shall assume and pay upon demand
all out-of-pocket expenses incurred by Lender in connection with the preparation of loan
documents and the making of the Loan, including, without limitation, the following: (a) all
closing costs, fees, and disbursements; (b) all expenses of Lender's legal counsel; and (c) all title
examination fees, title insurance premiums, appraisal fees, survey costs, required fees, and filing
and recording fees.
3. DISBURSEMENT.
Lender shall disburse the Loan proceeds (“Loan Proceeds”) in the following manner:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________
4. USE OF THE LOAN FUNDS.
4.1 Loan Commitment Amount. As of the Closing Date, Lender commits to disburse
Loan principal in the total amount of the Loan (“Loan Commitment Amount”).
After the Closing Date, the Loan Commitment Amount will equal the principal
amount of the Loan less the total amount of Advances made to date. Any Loan
Commitment Amount that remains after all Advances have been made will be
credited as a partial prepayment of the principal amount of the Loan at the time of
the final