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Construction Loans

Helping build your dreams.

At First Merchants, you’re more than just a loan. We know building or renovating your home can feel like a big undertaking, and that’s why our construction home loans are set up to make the process smooth and easy. 

With our construction-to-permanent loan program, you’ll have a short-term loan (usually 12 to 18 months) that converts to a traditional mortgage when the project is complete—all with one convenient closing.

Our experienced, attentive construction lending team is here to help every step of the way. They’ve worked in the construction field, so they understand what it takes to help you succeed. Any bank can provide funding, but First Merchants cares about providing you with so much more.  


Construction Loan Program


  • Loans up to $3 million1
  • Adjustable rate (ARM) and fixed rate options
  • Borrow up to 90% of the sales price or the appraised ‘Subject to Completion Value” of your new home
  • Up to 18 months to build2
  • Draw requests completed in a timely manner
  • Interest only payments during the construction phase
  • Single, one-time closing
  • Option to convert to current mortgage rates after construction is complete (terms apply)
  • Local underwriting and servicing, quick turnaround times, and a local team you can turn to

Designed For

  • Financing new construction or renovating an existing home
  • Building on your lot or purchasing a lot


  • Primary and secondary homes
  • Property must be located in Indiana, Michigan, Ohio, Illinois, or Kentucky 
  • Minimum credit score of 680

Applying for a construction loan is very similar to applying for traditional mortgage financing. Our team will review your information and reach out with any questions or if additional documentation is needed. You’ll also need to provide information about your builder so we can make sure they meet our requirements. 

Meet with an attentive mortgage professional to evaluate your current situation and better determine which mortgage options might be right for you.



Construction loans at First Merchants Bank are construction-to-permanent or one-time close loans. This means we offer a complete solution to provide the funds to purchase the land and construct your home through a series of draws paid to your builder. Once the project is complete the loan converts to a permanent mortgage. 
Yes. Our Renovation loan program allows us to lend on the future appraisal value or Subject to Completion Value. This means with your project plans and specifications, your house may be valued more with the new improvements. This allows you to borrow against this future value to help fund your renovations. 
Depending on the program type, First Merchants Bank can lend up to 90% of the “Subject to Completion Value” Appraisal. 
Yes. Purchasing the land or paying off an existing lot loan or land contract may be included in your construction loan. 

You’ll need similar information to apply for a construction loan as you would for a traditional mortgage, plus information about your project and builder.

Start by gathering current and previous addresses (past two years), current and previous employment (past two years), income, assets and liabilities, current monthly housing expenses, and any market value information for properties you own. 

To cover the construction and builder portion, you’ll want to have your Builder Registration, project plans and specifications, project budget or Sworn Statement, building contract between builder and borrower, and Builder’s Risk Insurance. 

Thirty to forty-five days. A construction loan has more moving parts than a traditional purchase or refinance transaction which can add additional time to the process. For example, your builder needs to be registered with First Merchants Bank and the entire project must be reviewed to make sure the build contract, specifications, and costs associated with the project meet our requirements. We strive to get you to the closing table as soon as possible but this timeframe can vary due to factors outside of our control. 
Use your network: it’s a great idea to start your search with friends, family members, or colleagues who have recently had work completed on their homes or businesses. Once you have potential candidates, be sure to interview the builder, contact references, see their finished work, and check with industry related groups. 
No. It is your responsibility to properly vet your builder by reviewing their previous work, talking with other homeowners, and contacting their subcontractors and suppliers. You will also want to check with the State to see if there were any complaints filed against their builder’s license. The BBB is also a good source for this information. You are going to be working with this builder closely for the next year or more completing your project. First Merchants Bank does register the builders by reviewing the Builder’s Questionnaire Form (First Merchants Bank form but completed by the Builder) and other supporting documentation supplied by the builder. Make sure to spend your time wisely by performing your own due diligence. This is an important decision and should not be overlooked. 
Yes, you will make simple interest payments on the amounts drawn against your construction loan. In essence, you only pay interest on what you borrow or draw. Once the construction is completed on your home, the construction-to-permanent loan will convert to the Principal and Interest payment established at your loan closing. 
During the project, your builder will make requests for funds called Construction Draws. Typically, a builder will need five draws to complete your new home. These construction draws will be for work completed or deposits required to order certain items. For example, once the framing of your home is complete, the builder will request funds to pay for the lumber and labor to erect the home. First Merchants Bank offers the flexibility for your builder to request anywhere from 10 to 30% for materials that the industry normally requires deposits on before commencing production on the order. Windows, doors, cabinets, and countertops are all items that typically require this kind of deposit. 

First Merchants Bank will verify the work is completed by performing a site inspection of the property. In addition, we will verify with our title company that no liens have been filed by subcontractors or suppliers. Lastly, we will confirm that you authorize the release of the construction draw funds to your builder. 

Still have questions? Check out our Construction Loan Handbook to learn how First Merchants can be there for you every step of the way.

Construction Loan Handbook

Clicking this button will download a PDF document to your device.


1 Higher loan amounts may be available upon request.

2Extensions available up to a maximum of 24 months. Terms apply.


All loans are subject to credit approval. Programs are available only to qualified borrowers. Not all applicants will qualify for all program benefits. Please contact First Merchants Bank to learn more about the program and the eligibility requirements. Programs are subject to change without notice. Underwriting terms and conditions apply. Some restrictions may apply.