The Change Order Process: Paperwork That Keeps Draws Flowing

A change order is a written update to the scope of work and budget your lender approved at closing. Lenders ask for one because rehab money is released against that approved plan. Send it in ahead of your next draw and the change becomes routine. Skip it and your draw can stall.

Editor's note: this article covers the process and paperwork. A companion piece, "When the Scope Changes: What It Does to Your Rehab Loan," covers the financial impact on loan size and cash.

What counts as a change

Any meaningful change to the approved plan, in either direction:

• Adding work nobody planned for, like rotted subfloor found during demo
• Swapping materials, such as upgrading laminate counters to quartz
• Dropping a line item you no longer need
• Moving money from one line to another

Small swaps that do not change the total may still need to be documented. Ask your lender where the line is.

Why the paperwork matters

Draw inspectors compare the work they see against the budget on file. If the budget says new carpet and the inspector finds tile, the draw does not match the plan. The lender cannot release money it cannot tie to approved work. A change order closes that gap before it becomes a problem.

What a clean change order includes

Keep it simple and specific:

1. What changed. One or two sentences describing the revision.
2. Why. Hidden damage, a code requirement, a buyer-driven upgrade.
3. Cost impact. The old line amount, the new amount and the difference.
4. Updated budget. The full revised scope with new totals.
5. Support. Contractor bid, photos of the issue, or an inspector's note.

Example (illustrative only): Demo uncovers a cracked drain line. The plumber quotes $4,000. You submit a change order describing the issue, attach photos and the bid, and show the bathroom line moving from $8,000 to $12,000. You note that you will fund the difference. The lender approves, and the next draw goes through on schedule.

Timing is everything

The most common reason a change order causes delays is that it shows up with the draw request instead of before it. Make it a habit: the day you decide to change the scope, send the paperwork. Your contractor gets paid faster and nobody is surprised.

What this means for you

Treat change orders as part of the job, not a penalty. Write it down, back it up, and send it early. That keeps your lender, your contractor and you working from the same plan.

Questions about how draws and change orders work on your project? Call RSC Private Lending at (832) 648-4619 or email info@rscprivatelending.com. All loans are business-purpose and subject to underwriting.