§25.3 - Construction Loans

• Jurisdiction: Washington

§25.3 Construction Loans

Construction loans typically will have the following characteristics:

• The loan will be secured by a first deed of trust, security agreement, assignment of leases and rents, and fixture filing against the project.
• Loan funds will be advanced in incremental "progress advances" rather than being fully advanced at loan closing.
• The loan usually will provide for full recourse to the borrower, as distinguished from limiting the lender's recourse to its collateral.
• The loan documents often will include payment guaranties and project completion guaranties from creditworthy principals of the borrower.
• The project budget typically will include an "interest reserve" that allows for the capitalization of interest (monthly advances of principal to pay interest as it accrues).
• The term of the construction loan...