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Exhibit 10.3
 CREDIT AGREEMENT
 among
 WACHOVIA BANK, NATIONAL ASSOCIATION (Lender)
 and
 COMSTOCK HOMEBUILDING COMPANIES, INC.
(Borrower)
 joined in by
 CAPITOL HOMES INC. and COMSTOCK WESEL, L.L.C.
 (Collectively, Guarantor)
 FOR $40,000,000 SENIOR SECURED REVOLVING CREDIT FACILITY




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TABLE OF CONTENTS
 PageARTICLE 1 DEFINITIONS AND REFERENCE TERMS
    
    
    1ARTICLE 2 DESCRIPTION OF FACILITY
    
    
    62.01
    
    
    Facility
    
    
    62.02
    
    
    Additional Provisions Related to Principal, Interest and Costs
    
    
    72.03
    
    
    Revolving Credit Feature
    
    
    92.04
    
    
    Commitment Fee
    
    
    92.05
    
    
    Conditions Precedent
    
    
    9ARTICLE 3 ADVANCE CONDITIONS
    
    
    123.01
    
    
    Procedures for Advances
    
    
    123.02
    
    
    Repayment of Advances
    
    
    123.03
    
    
    Advance Rates
    
    
    133.04
    
    
    Borrowing Base Availability
    
    
    133.05
    
    
    Partial Releases
    
    
    153.06
    
    
    Periodic Appraisals
    
    
    15ARTICLE 4 REPRESENTATIONS AND WARRANTIES
    
    
    154.01
    
    
    Good Standing
    
    
    154.02
    
    
    Authority and Compliance
    
    
    154.03
    
    
    Binding Agreement
    
    
    154.04
    
    
    Litigation
    
    
    164.05
    
    
    No Conflicting Agreements
    
    
    164.06
    
    
    Ownership of Assets
    
    
    164.07
    
    
    Financial Statements
    
    
    164.08
    
    
    Place of Business
    
    
    164.09
    
    
    Environmental Matters
    
    
    164.10
    
    
    Federal Reserve Regulations
    
    
    164.11
    
    
    Consents, Etc.
    
    
    174.12
    
    
    Governmental Authorizations
    
    
    174.13
    
    
    Title to Properties
    
    
    174.14
    
    
    Solvent
    
    
    174.15
    
    
    Intent and Effect of Transactions
    
    
    174.16
    
    
    Incorporation of Representations and Warranties
    
    
    174.17
    
    
    Material Contracts
    
    
    184.18
    
    
    Use of Proceeds
    
    
    184.19
    
    
    Tax Returns and Payment
    
    
    184.20
    
    
    Investment Company Act of 1940
    
    
    184.21
    
    
    Management and Other Agreements
    
    
    18ARTICLE 5 AFFIRMATIVE COVENANTS
    
    
    185.01
    
    
    Financial Statements and Other Information
    
    
    185.02
    
    
    Financial Covenants
    
    
    195.03
    
    
    Restrictions on Investment
    
    
    205.04
    
    
    Restrictions on Liabilities
    
    
    205.05
    
    
    Existence and Compliance
    
    
    205.06
    
    
    Adverse Conditions or Events
    
    
    205.07
    
    
    Taxes and Other Obligations
    
    
    205.08
    
    
    Maintenance
    
    
    205.09
    
    
    Notification
    
    
    215.10
    
    
    Organizational Structure
    
    
    21




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5.11
    
    
    Observe All Laws
    
    
    215.12
    
    
    Governmental Licenses
    
    
    215.13
    
    
    Compliance with Laws
    
    
    215.14
    
    
    Visitation Rights
    
    
    215.15
    
    
    Payment of Indebtedness
    
    
    215.16
    
    
    Subordination
    
    
    215.17
    
    
    Notice of Default
    
    
    225.18
    
    
    Interstate Land Sales Full Disclosure Act
    
    
    22ARTICLE 6 NEGATIVE COVENANTS
    
    
    226.01
    
    
    Character of Business
    
    
    226.02
    
    
    Additional Negative Covenants
    
    
    22ARTICLE 7 DEFAULT
    
    
    23ARTICLE 8 REMEDIES UPON DEFAULT
    
    
    24ARTICLE 9 JOINDER INTO DECLARATIONS
    
    
    259.01
    
    
    Consent to Master Association Declarations, Easements and Plats
    
    
    25ARTICLE 10 NOTICES
    
    
    25ARTICLE 11 COSTS, EXPENSES AND ATTORNEYS FEES
    
    
    26ARTICLE 12 MISCELLANEOUS
    
    
    2612.01
    
    
    Cumulative Rights and No Implied Waiver
    
    
    2612.02
    
    
    Applicable Law
    
    
    2612.03
    
    
    Amendment
    
    
    2612.04
    
    
    Documents
    
    
    2612.05
    
    
    Partial Invalidity
    
    
    2612.06
    
    
    Indemnification
    
    
    2712.07
    
    
    Survivability
    
    
    2712.08
    
    
    Course of Dealing
    
    
    2712.09
    
    
    Successors and Assigns
    
    
    2712.10
    
    
    Net Payments
    
    
    2712.11
    
    
    Further Assurances
    
    
    2812.12
    
    
    Resurrection of Borrowers Indebtedness
    
    
    2812.13
    
    
    Equitable Relief
    
    
    2812.14
    
    
    Multiple Borrowers
    
    
    2812.15
    
    
    Identification of Lender
    
    
    2812.16
    
    
    Brokers Commission
    
    
    2812.17
    
    
    No Usurious Amounts
    
    
    2812.18
    
    
    Approvals
    
    
    2812.19
    
    
    Documentary and Intangible Taxes
    
    
    2912.20
    
    
    Confidentiality
    
    
    2912.21
    
    
    USA Patriot Act Notice
    
    
    2912.22
    
    
    Counterparts; Effective Date
    
    
    29ARTICLE 13 AMBIGUITY OR CONFLICT
    
    
    29ARTICLE 14 JURISDICTION, SERVICE OF PROCESS
    
    
    30ARTICLE 15 NO ORAL AGREEMENT
    
    
    30ARTICLE 16 WAIVER OF JURY TRIAL
    
    
    30
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16.01
    
    
    Waiver of Jury Trial
    
    
    30
 Index to Schedules
 Schedule A
    
    Borrowing Base CertificateSchedule B
    
    Certificate of ComplianceSchedule C
    
    Request for AdvanceSchedule One
    
    Advance Rates
 iii




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CREDIT AGREEMENT
 THIS CREDIT AGREEMENT
   ARTICLE 1
 DEFINITIONS AND REFERENCE TERMS
  Accounting Terms. GAAP
 Advance.
 Amenities.
 Authorized Signatory.
 Borrower.
 Borrowing Base.
 Borrowing Base Certificate. Schedule A
 Borrowing Base Availability. Section 3.04.
 Borrowing Base Maximum Eligibility. Section 3.04,
 Borrowing Date.
 Budgeted Project Cost.




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Business Day.
 Closing.
 Collateral Pool.
 Commitment.
 Commitment Amount.
 Contingent Liability.
 Debt Service.
 Deed of Trust.
 Default.
 Default Rate.
 Development Agreement.
 Dollars and/or the symbol $.
 2




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Effective Tangible Net Worth.
 Entitled Land.
 Event of Default. Article 7.
 Facility.
 Financing Statements.
 Finished Lots.
 Future Guarantors. Guarantees Future Guarantors
 Guarantor. Guaranty.
 Hazardous Materials.
 Indebtedness.
 Land Closing.
 3




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Land Under Development or LUD.
 Liquidation Proceeds.
 Loan Documents.
 Lot.
 Material Adverse Effect.
 Maturity Date.
 Model Units.
 Note.
 Obligations.
 4




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Permitted Liabilities.
 Person.
 Project.
 Secured Debt.
 Senior Liabilities.
 Sold Units.
 Solvent.
 Speculative Condos/Townhomes.
 Speculative Units.
 5




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Submission Package.
 Tangible Net Worth.
 Term.
 Total Liabilities.
 Unit.
 Unsubordinated Total Liabilities.
 ARTICLE 2
 DESCRIPTION OF FACILITY
 2.01 Facility .
 Obligation to Make Advances .
 Security for Facility .
 6




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Interest Rate .
 Termination of Facility .
 2.02 Additional Provisions Related to Principal, Interest and Costs .
 Increased Costs .
 Payments Net of Taxes .
 Repayment of Principal and Interest . Payment
Date
 Prepayment .
 Application of Payments .
 7




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Late Charge .
 Default Rate .
 Letters of Credit Sub-limit Under the Facility . Work Letters of Credit Letters of Credit
Sub-Limit
   Swap .
 8




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2.03 Revolving Credit Feature .
 2.04 Commitment Fee . Commitment Fee st th st Non-Use Fee th th th
 2.05 Conditions Precedent .
 No Default .
 Opinions of Counsel .
 Loan Documents .
 Appraisal .
 Environmental Assessment .
 9




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Title Insurance and Survey . Title Commitment   Title
Company Policy
 Insurance .
 10




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Flood Zone Certification .
 Organizational Documents .
 Governmental Permits .
 Other Documents .
 Supporting Documents and Other Conditions . Schedule B
 Litigation .
 Documents .
 Subordination to Loan .
 Inspections .
 11




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ARTICLE 3
 ADVANCE CONDITIONS
 3.01 Procedures for Advances .
 Schedule C Request
for Advance Advance Request
  Borrowing Base Compliance .
 3.02 Repayment of Advances .
 12




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3.03 Advance Rates . Schedule One
 3.04 Borrowing Base Availability . Schedule One
     Schedule One
 
    
    Aging Elimination on Entitled Land begins on the date the Entitled Land is admitted to
the Borrowing Base, and resets when the Entitled Land becomes LUD.
    
    Aging Elimination on LUD begins when the LUD first enters the Land Under Development
category, and resets when LUD becomes Finished Lots.
 13




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
    
    Aging Elimination on a Finished Lot resets when the Finished Lot becomes a Speculative
Condo/Townhome, Model, Speculative or Sold Unit.
    
    Aging Elimination on a Speculative Condo/Townhome, Speculative Unit or Sold Unit
begins when the Unit is added to the Borrowing Base as a Speculative Condo/Townhome, Speculative
Unit or Sold Unit, and does not reset when a Speculative Condo/Townhome or Speculative Unit becomes
a Sold Unit.
          14




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3.05 Partial Releases .
    3.06 Periodic Appraisals . Section 2.05(d)
 ARTICLE 4
 REPRESENTATIONS AND WARRANTIES
  4.01 Good Standing .
 4.02 Authority and Compliance .
 4.03 Binding Agreement .
 15




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4.04 Litigation .
 4.05 No Conflicting Agreements .
 4.06 Ownership of Assets .
 4.07 Financial Statements .
 4.08 Place of Business .
 4.09 Environmental Matters .
 4.10 Federal Reserve Regulations .
   16




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4.11 Consents, Etc.
 4.12 Governmental Authorizations .
 4.13 Title to Properties .
 4.14 Solvent .
 4.15 Intent and Effect of Transactions .
 4.16 Incorporation of Representations and Warranties .
 17




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4.17 Material Contracts .
 4.18 Use of Proceeds .
 4.19 Tax Returns and Payment .
 4.20 Investment Company Act of 1940 .
 4.21 Management and Other Agreements .
 ARTICLE 5
 AFFIRMATIVE COVENANTS
  5.01 Financial Statements and Other Information . Section 4.09
 18




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Financial Reporting
    Section 5.02
     5.02 Financial Covenants .
 19




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Senior Liabilities to Effective Tangible Net Worth Ratio .
 Global Sold/Un-sold Unit Ratio . Section
5.02(b)
 EBITDA/Debt Service Ratio .
 Tangible Net Worth .
 Deposit Accounts .
 5.03 Restrictions on Investment .
 5.04 Restrictions on Liabilities .
 5.05 Existence and Compliance .
 5.06 Adverse Conditions or Events .
 5.07 Taxes and Other Obligations .
 5.08 Maintenance .
 20




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5.09 Notification .
 5.10 Organizational Structure .
 5.11 Observe All Laws .
 5.12 Governmental Licenses .
 5.13 Compliance with Laws .
 5.14 Visitation Rights .
 5.15 Payment of Indebtedness .
 5.16 Subordination .
 21




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Junior Claims
 5.17 Notice of Default .
 5.18 Interstate Land Sales Full Disclosure Act .
 ARTICLE 6
 NEGATIVE COVENANTS
  6.01 Character of Business .
 6.02 Additional Negative Covenants .
     22




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ARTICLE 7
 DEFAULT
 Event of Default
 7.01
 7.02
 7.03
 7.04
 7.05
 7.06
 7.07
 7.08
 7.09
 7.10
 7.11
 23




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7.12
 7.13
 7.14
 7.15
 7.16
 7.17
 ARTICLE 8
 REMEDIES UPON DEFAULT
 Section 7.05
 Article 8 Article 8
  24




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Article 8 Article 8
 ARTICLE 9
 JOINDER INTO DECLARATIONS
 9.01 Consent to Master Association Declarations, Easements and Plats .
 ARTICLE 10
 NOTICES
  Borrower:
    
    Comstock Homebuilding Companies, Inc.11465 Sunset Hills Road, 5th FloorReston, Virginia 20190Attn: Christopher ClementeTelephone: (703) 883-1700Fax: (703) 760-1520Borrower:
    
    Comstock Homebuilding Companies, Inc.11465 Sunset Hills Road, 5th FloorReston, Virginia 20190Attn: Jubal ThompsonTelephone: (703) 883-1700Fax: (703) 760-1520Lender:
    
    Wachovia Bank, National Association150 Fayetteville Street, NC 3288Raleigh, North Carolina 27602Attention: Joe MorroccoTelephone: (919) 881-7237Fax: (919) 881-6647Email: joe.morrocco@wachovia.comWith a copy to:
    
    Parker Poe Adams & Bernstein LLPThree Wachovia CenterSuite 3000401 South Tryon StreetCharlotte, North Carolina 28202-1935Attention: Alan G. Dexter, Esq.Telephone: (704) 335-9042Fax: (704) 335-9559Email: alandexter@parkerpoe.com
 25




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ARTICLE 11
 COSTS, EXPENSES AND ATTORNEYS FEES
  ARTICLE 12
 MISCELLANEOUS
  12.01 Cumulative Rights and No Implied Waiver .
 12.02 Applicable Law .
 12.03 Amendment .
 12.04 Documents .
 12.05 Partial Invalidity .
 26




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12.06 Indemnification .
  Section 12.06
 12.07 Survivability .
 12.08 Course of Dealing .
 12.09 Successors and Assigns .
 12.10 Net Payments . Taxes
 27




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Article 12.10
 12.11 Further Assurances .
 12.12 Resurrection of Borrowers Indebtedness .
 12.13 Equitable Relief .
 12.14 Multiple Borrowers .
 12.15 Identification of Lender .
 12.16 Brokers Commission .
 12.17 No Usurious Amounts .
 12.18 Approvals .
 28




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12.19 Documentary and Intangible Taxes .
 12.20 Confidentiality .
 12.21 USA Patriot Act Notice .
 12.22 Counterparts; Effective Date .
 ARTICLE 13
 AMBIGUITY OR CONFLICT
  29




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ARTICLE 14
 JURISDICTION, SERVICE OF PROCESS
   ARTICLE 15
 NO ORAL AGREEMENT
  ARTICLE 16
 WAIVER OF JURY TRIAL
 16.01 Waiver of Jury Trial .
 30




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31




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IN WITNESS WHEREOF
 LENDER:WACHOVIA BANK, NATIONAL ASSOCIATIONBy:Name:Title:AGREED TO AND ACCEPTED BY:BORROWER:COMSTOCK HOMEBUILDING COMPANIES, INC.,a Delaware corporationBy:Name:Title: