Construction Loans

Start building your dream home within a Home Construction Loan from Citizens Bank

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.

Applying Construction-To Permanent Loans whether or not you own your land

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.

  • Buying land for your home: Finding the right lot is an important step when designing your dream home. If you need a loan to purchase the lot for home construction, consider construction home loans from Citizens Bank. Our construction loans are designed to include both lot financing and construction financing in one simple borrowing option.
  • Building on land you own: Already have a lot purchased to build your home on? Looking to extensively remodel your current home, or that fixer-upper you just purchased? Citizens Bank residential construction loans can also be used to rehabilitate or build on property you already own.

  • Overview
  • Home Construction Loan FAQ

Benefits of construction-to-permanent home loans

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:

  • Borrow up to $2 million
  • Lock in the interest rate when you apply
  • Finance a lot or build on a lot you already own
  • Build a primary residence or vacation home
  • Take advantage of a 12-month construction period
  • Make interest-only payments during construction on funds already disbursed
  • Transition to a fixed or adjustable rate loan as your permanent financing
  • Get a discounted mortgage rate through Circle Gold Mortgage Advantage
  • Close once to save time and money
  • Obtain interest-only payment structure during permanent financing*
  • Live in your existing home while building your new home with the Home-to-Home Loan® program*

*Check with your representative to see if these options are available in your area.

Frequently asked questions about the home construction loan application process

  • 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:

    • A copy of the deed to the land, whether you own it or are purchasing it
    • HUD -1 Settlement Statement for the purchase of the land if you purchased it within 12 months of applying for the loan
    • Contract for the purchase of the land if you don't own it already
    • Contract with a builder
    • Complete builder information: Company name, address, phone number and federal tax ID number
    • Plans and specifications for the home
    • Certificate of liability insurance for the builder
    • Builder's risk/homeowner's policy
    • Building permit - only required if builder wants disbursements at closing (no more than 10%)
  • 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.

    • Fees for inspections, which are required before disbursements can be made during the construction process. (Any additional inspection fees will be collected as they are incurred.)
    • Fees paid to the title insurance company for title updates. (Some states require these at the time of disbursements.)
  • 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:

    • 100% complete inspection report from the inspection company
    • Final title update ordered from the title insurance company
    • Certificate of Occupancy from the builder
    • Completion and acceptance letter- signed by the borrower and builder to verify that construction is complete. May exclude landscaping additions that are weather dependent
    • Final lien waiver or affidavit signed by builder
    • Homeowner's insurance policy with the first year's premium paid in advance

Ask your lender for a more complete list of frequently asked questions when you apply.

Transitioning to a permanent loan from a loan for home construction

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:

  • Sign the Modification Agreement if your permanent loan will differ from the original agreement. (This may be because you didn't need as high a loan amount or construction finished sooner than expected.)
  • Choose to set up automatic mortgage deductions if you have Circle Gold Mortgage Advantage.

Take out a Construction-To-Permanent Mortgage Loan from Citizens Bank

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.