Financing the construction of your home requires a mortgage that will meet your unique construction needs. If you've decided you want to build your new home, you may be able to use our Construction-To-Permanent Loan to help get your dream started. A Construction-To-Permanent Mortgage Loan is designed to take you from purchasing the lot through completion of construction with one loan. Instead of obtaining separate lot and construction financing, as you approach the end of your construction period, work with your lender to transition from a construction loan to a permanent loan.
Building a home can create a perfectly customized space for your family. Whether or not you own your own land, a home construction loan can simplify the borrowing process by ensuring you have the funds to build your dream home in one closing.
The Construction-To-Permanent Mortgage Loan from Citizens Bank is designed to simplify the borrowing process when building your home. Here's how you can put our construction loans to work for you:
*Check with your representative to see if these options are available in your area.
What is the approval process like for construction-to-permanent loans?
The approval process for construction loans is similar to that of a typical mortgage. Underwriting still reviews your income, assets, liabilities, credit history and appraisal before granting approval. The main distinction is that the amount you can borrow will also be based on the improved value of the property after renovation or construction.
How long does the approval process take?
Prepare for the home construction loan mortgage process to take a few weeks longer than a standard mortgage approval (7-10 days) might, due to the plans, specs and contracts that must be reviewed before it can be approved. Getting pre-approved can help accelerate the process and determine how much home you can afford. Be sure to factor the cost of the land into the estimate if you will need financing for the lot as well.
What do I need to apply?
As you prepare to submit your construction loan application, be sure to have the following documents and information on hand:
What do I need to know about the processing phase of my loan approval?
After you submit your application you will receive specific disclosures to guide you through the processing of your loan. These documents will explain disbursements to builders as well as the documentation you need to submit. Inform your lender if you need to make any changes to the contract with your builder. Try to have the application and other documents to your lender at least 48 hours before closing to provide ample time to meet the needs of this niche product.
Will I have one or two closings if I'm purchasing land and financing construction?
You only face one closing with a construction-to-permanent loan.
What fees will I face when closing the loan?
The closing process for home construction loans is similar to any other mortgage closing, but there are some fees you will only see on construction home loans.
What mortgage payments do I make during construction?
During construction you will be responsible for interest-only monthly payments on funds that have already been disbursed. You may also see fees or late charges on your bill, but you will not be billed for taxes or insurance during construction. You are also not required to make payments toward the principal of your loan during construction.
How do disbursements work?
Instead of paying for the construction of your home upfront, loans are disbursed at an average of five predetermined stages during the building process. Your contract with the builder should outline how many disbursements you'll have and when they will be made. Disbursements to subcontractors are signed by both the borrower and builder. If the disbursement is going to the builder, you will need to provide verbal confirmation before the disbursement can be allocated.
If necessary, a title inspection and title update may accompany a disbursement request. After a request is made, funds are generally disbursed within seven business days of the request and 24 hours of the receipt of the inspection and title update. Disbursement amounts vary based on the percentage of work completed. Talk to your builder and lender to work out a system of disbursements that works for you.
What do I need to convert my construction loan into a permanent loan?
After construction is completed, you will need certain information to convert your construction loan to a permanent loan. Check with your lender to determine what information you need specific to your situation, but the following items are generally needed:
Ask your lender for a more complete list of frequently asked questions when you apply.
At the end of the construction period your home construction loan will be converted to a permanent loan without additional closing costs. At that point in time you will begin paying both interest and principal each month. Here's what you'll need to do to transition your loan:
When you're ready to start building your dream home, talk to a Citizens Bank mortgage representative to get pre-approved for a home construction loan. Call 1-888-514-2300 or find a branch near you to start the mortgage process today.