You're ready to break ground on your new home. But how do you get started? Luckily we're here to help!

You're ready to break ground on your new home. But how do you get started? Luckily we're here to help!


When you obtain a loan for home construction, you the homeowner and we the bank combine funds to build your home. Your down paymentThe amount you contribute to the construction project.x plus our Loan ProceedsThe amount you borrow for the construction project.x combine to provide the amount needed to build your home.

Where's the Money?


Our loan program is called a Construction/PermanentConstruction financing that combines the loan used to build a home with a permanent long term mortgage.x Loan. This type of loan has only one closing, before your project begins. You lock your rateThe decision to set your interest rate for the entire term of your loan, including both the construction and permanent phase.x, programThe repayment terms you select i.e. a Fixed Rate Loan, or an Adjustable Rate Loan.x, and termThe number of years you choose to repay your loan, typically from 15 to 30 years.x up front, and the loan automatically converts from a construction loan to a permanent loan when your home is complete.

Loan Help


Your home starts with plansThe architectural drawings of the size and layout of your home.x. You determine the home you want to build and then work with a builder to determine the cost of building that home. Once you have made all of your decisions, you and the builder agree in writing on the home you plan to build and the cost it will take to build that home.

Building Steps


A construction permanent loan requires all the typical income and asset documentation like any other mortgage.

We also need specific information related to the construction project and we have some special forms we use during the draw processThe process of obtaining loan funds to pay for the items that have been completed on your home. This typically takes 4-5 draws, over 6-9 months.x.

How Much Paperwork?
the money
step 1

One of the first steps is to determine the total cost of your home, by combining the cost of the land plus the cost to build the home. Then you can subtract anything you have already paid toward the cost. For example if you have already purchased the lot or given the builder a deposit. You may contribute additional funds toward the project, ultimately arriving at the amount you want to borrow - your loan amount.

step 2

When you close on your loan, your funds and your loan funds combine as the amount of your construction escrowThe total amount needed to build your home. This may include your down payment and your loan proceeds. The Construction Escrow must always be sufficient to complete your home.x. These are the funds that will be used to build your home. When items need to be paid, your builder will take a drawA request for disbursement for your construction project. x and we will use your money first. Once you need money from the loan funds, your construction loan has a balance and you will begin paying interest.

step 3

When a draw is taken, we verify that the amount needed for each item hasn't changed from the original agreed price. We do this because your construction escrow and the cost of your home must always remain in balanceThe process of making sure your construction escrow is sufficient to complete your home at all times. Contract revisions or unexpected expenses can cause the project to become out of balance. x. If an item increases, for example if you choose to upgrade your countertop selection, you need to contribute the cost of that increase to your construction escrow so that the project remains 'in balance'.

step four

Draws take about a week to complete. The process starts when a request is submitted to the Title CompanyA company that ensures that your home remains clear of any liens by overseeing all of the construction payouts to contractors and subcontractors. x. The Bank is also notified and a Property InspectionA visual inspection of the project by the appraiser at each draw request, to ensure that all items being paid for are complete. x is performed to verify that the items requested are complete. You are asked to sign an Owners AuthorizationA document authorizing the release of draw funds signed by the borrower. x and then funds are drawn from the bank and sent to the Title Company. The Title company makes sure that your home remains free of liens and pays out the draw funds.


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the loan

When you have a home planThe architectural drawings of the size and layout of your home. x selected and an agreed upon price to build the home, you are ready to apply for your construction loan. You can lock your rate when you apply and begin the process of review and approval. We will complete an appraisalA written determination of the value of your home completed by an appraiser. The value is determined based on the proposed construction project being completed. The appraiser completes inspections during the construction project as a part of the appraisal process. x of your home based on the plans and costs provided by you and your builder.
*All loans are subject to credit and underwriting approval. Certain fees and restrictions may apply.


After about 30-60 days, we are ready to close on your loan. Your closing will take place at a Title Company, and they will be involved throughout the construction process. Your loan will include a term for Construction and a term for Permanent financing.


Once you have closed on your loan you can get started on your home.The construction term is typically 9 months. During that term, you are billed monthly only for interest on the amount of the loan you have used along with an escrow payment, if applicable. As your project progresses, draws are taken and the balance of your loan increases as it is used to pay for your project.


Upon completion, typically 4-5 draws over 6-9 months, your entire loan balance is drawn. Your loan then converts to a fully amortizing loan with payments of principal and interest over the term you selected. There is no additional closing, this happens automatically, and your rate, program, and term have already been determined and locked in. It is time to enjoy your new home!

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the home


In order to build a home you need to start with a home site and the home you would like to build. In order to secure a construction loan, you need to know how much that home is going to cost and who is going to perform the work to build that home.

In a typical construction project, home construction begins once you own your lot and you have closed on your loan. That way, all parties involved in the project know that the money is available to build the home. Sometimes, if you are funding a significant portion of the cost, and you already own your land, you may start your project before the loan has closed.


Once you have closed on your construction/perm loan your home construction project will begin. Your builder can tell you how long they expect the project to take and what items will be completed at what stages. As the items and stages are completed, the builder will take draws to pay for those items. For your protection, and to make sure the amount needed to complete your project is always available, the bank authorizes payment only for items that are complete and installed. We work with you on all requests for payment, and you authorize every draw.


When your home is complete, your municipality typically issues an occupancy permit and you are ready to move in. You may work with your builder on final punchlist items, such as exterior items that may be delayed due to weather.

Depending on your policy, changes may need to be made to your homeowners insurance but nothing has to be done with your loan. Your construction / permanent loan will automatically convert to the permanent program you selected.

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When you apply:

When you are ready to apply for a construction loan, typical documents are required to verify your income and assets. You can expect to be asked for:

  • Tax returns, W-2s, and paystubs
  • Bank statements for all assets, and in particular those assets that will be used toward the construction project

In addition, for a typical construction project you will need:

  • Documentation on lot purchase or existing ownership
  • Plans for the home you intend to build
  • A contract with a builder agreeing on a price to build the home
  • A sworn statement itemizing the cost broken down by subcontractor and/or supplier.

When you close:

A construction permanent closing contains typical mortgage documentation with just a few extra forms related to the construction financing.

You will need to provide insurance for your property at or before closing. You will want to consult with your insurance agent to secure the proper coverage while your project is being completed and for when your home is complete.

While you build:

During the construction term, draws are taken for completed items by submitting a sworn statement to the Title Company.

The Bank is also notified and a Property Inspection is performed to verify that the items requested are complete.

You are asked to sign an Owners Authorization at every draw.

Once you authorize, funds are drawn from the bank to the Title Company. The Title company pays for the items on the sworn statement in exchange for Lien Waivers.

The purpose of this process is to ensure that your home remains free of liens and that the funds are always available to complete your project.

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What is a Construction-to-permanent loan?

A construction-to-permanent mortgage is both your construction loan and long term mortgage combined into one; you will only have one closing for both your construction loan and your long term permanent mortgage, saving you both time and money.

The construction phase of the loan is typically around nine (9) months. Upon completion of the home, your loan will automatically converted to a permanent mortgage with no additional closing costs or fees.

How do I know how much I need to borrow?

First, you need to determine the total cost of your project, by combining the cost of the land with the cost to build your home. You will work closely with a builder to determine an agreed upon price for your home

You then determine how much you are contributing to the project. This may be the amount you have paid toward the land, deposits you have given to the builder, or additional cash savings you are going to use to build your home.

What are our monthly payments during construction?

You make interest only payments (monthly billing may include a portion of your insurance & real estate tax amount) during the construction phase on only the funds that have been drawn upon.

How do I access my loan funds to pay for my home?

Loan funds are accessed through draw requests submitted to the Title Company and First Federal Savings Bank. At each draw:

  • The home is inspected to verify that all items being paid are complete
  • A title search is performed to ensure that your home remains free of liens
  • You provide written authorization approving the draw

Typically five (5) draws are taken throughout the construction phase of the loan. Each draw can take approximately one week to be funded.

Why are draws processed through a Title Company?

The Title Company plays an important role in the process. It is their responsibility to make sure that all of the work being performed on your property is paid for, and that your home remains clear of liens. Contractors and subcontractors must certify that they have been paid, and that their work is complete.

All construction funds are disbursed through the Title Company.

Do I have another loan closing when my home is complete?

No. Our loan program is a construction-to-permanent loan, and it will convert automatically to your permanent financing at no additional cost, and with no additional closing.

What if I/we need more time to complete our home?

Construction delays due to weather and material/labor availability are fairly common. First Federal Savings Bank can work with you on extension of the construction phase of your loan if needed.

Do I/we have to use a lender approved builder?

No, First Federal Savings Bank does not have an approved builders list. You may choose your own builder; however if we have no prior experience with the builder, we may request references from whom the builder has completed similar projects and check with other venders. We recommend you complete your own research prior to entering into any contract.

Can I/we build our own home without a builder?

This is referred to as an Owner General. This is an exception to our normal construction loan process, and requires special approval. Being an Owner General means that you have no contract setting the price to build your home, making you responsible for obtaining all bids and managing all subcontractors. Owner General projects typically require that the owner have construction experience and additional cash investment in the project.

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