The schedule of values your lender will actually approve.

What a schedule of values actually is

A schedule of values is the line-item budget your construction lender approves before the first dollar funds — and the document every draw is measured against for the life of the loan.

On a purchase loan, the lender funds once at closing and is done. On a construction or heavy-rehab loan, the lender funds in stages as work gets completed, reimbursing you (or paying the contractor) for work that an inspector has verified. The schedule of values (SOV) is the map that makes that possible. It breaks the total construction budget into discrete line items — demolition, foundation, framing, roofing, mechanicals, finishes — with a dollar figure and a percentage of the whole assigned to each.

Two things flow from the SOV. First, the lender uses it at underwriting to sanity-check that your budget is realistic and that the as-completed value supports the total cost. Second, and for the life of the loan more importantly, every draw request is calculated against it: the inspector reports each line as a percentage complete, the lender multiplies that percentage by the budgeted amount, subtracts retainage and prior draws, and that is your check. A vague or front-loaded SOV does not just slow underwriting — it slows every single draw for the next nine months.

This article is the companion to how lenders verify percent-complete on construction draws. That piece covers the inspection side; this one covers the document that the inspection is scored against.

Anatomy of an SOV a lender expects

A lender wants the budget divided along the natural sequence of construction, roughly following the CSI division structure a general contractor already uses. Each line should be a trade or phase that an inspector can stand in front of and assess independently. Here is a representative SOV for a $180,000 gut rehab:

Notice what this is not: it is not “rehab — $180,000” as a single line, and it is not a list of materials receipts. It is organized by phase, in build order, with each line large enough to matter and small enough to verify. A lender reviewing this can see at a glance whether the budget is plausible — framing at 11% and finishes at 14% are normal; demolition at 15% or contingency at zero would draw a question.

Front-loading: the #1 reason an SOV gets kicked back

Front-loading is assigning more value to early line items than the work actually costs, so that early draws release more cash than the completed work justifies. A contractor might price demolition at $20,000 and finishes at $11,000 when the true costs are reversed — pulling cash forward to fund their own working capital.

Lenders reject front-loaded schedules on sight, because the entire draw model depends on the lender never being “ahead” of the work. If $40,000 has funded but only $25,000 of verifiable work is in the ground, the lender is exposed: should the project stall, the collateral is worth less than what has been advanced. Retainage exists precisely to keep a cushion against this, but a front-loaded SOV defeats it.

The draw model only works if the money never gets ahead of the work. A front-loaded schedule of values breaks that invariant on the very first draw.

The fix is simple: price each line at its true cost. If your contractor insists on mobilization money, that belongs in the general-conditions line as a defined, modest percentage — not smuggled into demolition. A clean, honestly-priced SOV is the single biggest predictor of fast draws over the life of the project.

How the SOV drives every draw

Once approved, the SOV becomes a scoring sheet. At each draw, the inspector walks the site and reports a percent-complete for each line. The lender funds the newly-completed value, holds retainage, and nets out what it has already advanced. Here is draw two on the budget above:

Every number in that calculation traces back to a line in the SOV. If framing had been lumped into a single “structure” line with foundation, the inspector could not score it at 60% independently — and you would wait for the whole line to finish before releasing any of it. Granularity in the SOV is granularity in your cash flow. The retainage (here 10%) is released at the end once the project passes final inspection and any lien-waiver requirements are satisfied.

Contingency, soft costs, and the GC fee

Three line items trip up first-timers because they are real costs that do not look like “construction.”

Contingency. Lenders expect a contingency line, typically 5–10% of hard costs on a gut rehab. An SOV with zero contingency reads as a budget that has not been pressure-tested. Contingency is not free money — it draws only against documented change orders or overruns — but its presence signals that you have planned for the surprises every rehab produces. The 3% shown above is on the lean end; on an older property, underwriting may want more.

Soft costs. Permits, architectural and engineering fees, surveys, and inspection fees are soft costs. Some lenders fold them into general conditions; others want a separate soft-cost line. Either way, they belong in the SOV — leaving them out means paying them from your own pocket on top of the down payment you already budgeted.

The GC fee. A general contractor’s overhead-and-profit (often 10–20% of hard costs) is a legitimate line. The mistake is hiding it — spreading it invisibly across trade lines, which then read as overpriced and invite scrutiny. Break it out as its own line and it sails through.

Building one that gets approved

A schedule of values that clears underwriting on the first pass shares a handful of traits:

• Organized in build order. Demolition before framing, framing before drywall, drywall before finishes. The lender should be able to read the sequence of the project off the page.
• Each line independently verifiable. If an inspector cannot stand in front of a line and assign a percentage, it is too vague. Avoid catch-all lines like “miscellaneous” over a few percent.
• Honestly priced, never front-loaded. Each line at its true cost. Mobilization money lives in general conditions, defined and modest.
• Contingency present and reasonable. 5–10% on a meaningful rehab. Zero contingency is a red flag.
• Soft costs and GC fee broken out. Not buried in trade lines.
• Totals to the loan budget exactly. The SOV must sum to the construction holdback in the loan, to the dollar.

Build it once, build it clean, and the rest of the loan runs on rails. Build it vague or front-loaded, and you will re-explain it at every draw for the life of the project. If you want a second set of eyes before you submit, send your draft SOV with your loan file and our construction desk will flag anything likely to slow a draw before it becomes a problem.

Glossary

• Schedule of values (SOV)

  The line-item breakdown of a construction budget, with a dollar amount and percentage assigned to each trade or phase, approved before funding and used to score every draw.

• Draw

  A stage payment released as work is completed and verified, calculated against the SOV.

• Retainage

  A percentage (commonly 10%) withheld from each draw and released at completion, protecting the lender against a stalled project.

• Front-loading

  Assigning more value to early line items than they actually cost, to pull cash forward — a top reason an SOV is rejected.

• General conditions

  Project overhead — supervision, mobilization, permits, temporary utilities — carried as its own SOV line rather than spread across trades.

• Contingency

  A reserve line (typically 5–10% of hard costs) that funds documented overruns and change orders.

Frequently asked questions