Building a home from the ground up is one of the most exciting, and complex, financial decisions you’ll ever make. A construction-to-permanent loan simplifies the process significantly, and at Andrew Johnson Bank, we make sure you never have to navigate it alone.
Whether you’ve been dreaming about a custom kitchen, a wraparound porch, or a layout designed exactly around your family’s life, the path from blueprint to move-in day involves more than just a contractor and a vision. It requires the right financing, and the right lending partner.
What Is a Construction-to-Permanent Loan?
A construction-to-permanent loan is a single loan product that covers both the construction of your new home and the long-term mortgage that follows. When your home is complete, the loan automatically converts, no second closing, no re-qualifying, no scrambling for new financing.
Compare that to a traditional two-loan approach, where you’d take out a short-term construction loan to fund the build, then pay off that loan and apply for a separate mortgage once the home is done. That means two applications, two sets of closing costs, two rounds of qualifying, and twice the paperwork. The construction-to-permanent loan eliminates all of that.
Key Benefit
One loan. One closing. One rate locked in from day one. Your interest rate is secured before construction begins and stays in place when your loan converts to a permanent mortgage, protecting you from market shifts throughout the entire build period.
How the Process Works, Step by Step
The construction-to-permanent process follows a clear path. Here’s what to expect when you work with Andrew Johnson Bank:
Get Pre-Approved
Sit down with a local Andrew Johnson Bank lender to review your finances, talk through your vision, and get pre-approved. Knowing your numbers upfront gives you confidence when selecting land and a builder.
Select Your Builder
Choose a licensed, insured contractor and finalize your blueprints. Your lender can help guide the vetting process and review your builder’s qualifications as part of the loan process.
Lock In Your Rate and Close
Before a single shovel hits the ground, you lock in your interest rate and close on your loan. This is your only closing — protecting your rate for the entire construction period and beyond.
Construction Begins — You Pay Interest Only
Your builder is paid in stages called draws as each phase of construction is inspected and approved. During this phase, you pay interest only on what’s been drawn — not the full loan amount.
Draw Requests and Inspections
Throughout the build, your Andrew Johnson Bank lender works alongside you and your builder, reviewing draw requests and helping keep the project on track.
Move In and Convert
Once construction passes final inspection and your certificate of occupancy is issued, your loan automatically converts to a permanent mortgage at your original locked rate. Regular principal-and-interest payments begin.
Why Andrew Johnson Bank for Your Construction Loan?
There are plenty of places to get a loan. What sets Andrew Johnson Bank apart is the way we handle the process, and the people who handle it with you.
Lock In Your Rate Early
Secure your interest rate before breaking ground. You’re protected from rate increases throughout the entire construction period, no surprises when it’s time to convert.
Simplified, One-Loan Process
One application, one closing, one loan from blueprint to keys in hand. Less paperwork, lower fees, and far less stress than managing two separate loans.
Local Decision-Making
Your loan is reviewed and approved right here in the community, by people who know East Tennessee. No waiting on a distant corporate office. Fast, informed decisions from a team that’s invested locally.
Personalized Guidance
A dedicated lender walks with you every step of the way, from your first question to the final draw review, so you’re never left wondering what comes next.
Common Questions
What do I pay during construction?
During the construction phase, you pay interest only on what’s been drawn — not the full loan amount from day one. As each phase of construction is funded, your interest payment increases incrementally. This gives you financial flexibility while you may still be covering your current rent or mortgage.
Can I use land I already own?
Yes. If you own the land you plan to build on, its value can often count toward your equity in the project, which may reduce the down payment you need to bring in cash. If you still need to purchase land, that can typically be rolled into the loan structure. Your Andrew Johnson Bank lender will explain how land ownership affects your overall financing.
What if construction takes longer than expected?
Delays happen — weather, supply chain issues, labor availability. Because we’re a local team making local decisions, we have the flexibility to respond quickly to timeline changes. Extensions can typically be arranged when needed, and your lender will stay in communication with you and your builder throughout.
Do I have to use a specific builder?
No approved-list requirement. You choose your contractor. Choosing a builder with a strong track record makes the approval process smoother — and your lender can offer guidance as you evaluate your options. If you’ve always wanted to be more hands-on with your home build, a construction-to-permanent loan may give you the flexibility to serve as your own contractor. Whether you’re managing the project yourself or bringing in trusted local subcontractors, you can stay in control while creating the home you’ve envisioned.
How long does the construction phase last?
Most residential projects are structured for a 12-month build period, though this varies by size and complexity. Once your home passes final inspection and your certificate of occupancy is issued, the loan converts and your regular payments begin.
Talk to a Local Lender Today
Tell us about your project and we’ll walk you through your options – no commitment, no pressure!