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Ask the Lender – How Do Construction Loans Work?

Andrew Rager

Andrew Rager | NMLS #554353

Many people dream of one day building their own home. Choosing floor plans, trim packages, and paint colors can be fun and exciting. Finding a way to finance a home build can be daunting and difficult. Most people cannot afford to pay for the cost of home construction up front, and getting a mortgage can be complicated. After all, you’re asking a bank to give you money for something that doesn’t even exist yet. A standard mortgage loan is not an option as it is designed to finance an existing or finished home. You will need to obtain a construction loan to finance the project during the building process.

A construction loan is typically a short-term line of credit used to pay for the cost of building a home. It may be offered for a set term (usually around a year) to allow sufficient time to build your home. At the end of the construction phase, when the house is complete, you will need to refinance the construction loan and obtain permanent financing.

Once you are qualified and approved for a construction loan, the lender begins disbursing the money to the builder as the construction progresses. These disbursements are called “draws”. Draws are designated intervals at which the builder can receive the funds to continue with the project. There may be several draws throughout the duration of the build. For instance, the builder may get the first 10% when the loan closes, and the next 10% after the lot is cleared and the foundation is poured. The next disbursement of money may come after the house is framed, and then the subsequent payout after the house is under roof.

The number of draws and the amount of each is negotiated between the builder, the buyer, and the bank. It is common for the bank to require an inspection at each draw request before releasing the money to the builder. This helps to ensure that everything is on track and that the money is being spent as it should.

With a construction loan, as with all other loans, you must pay interest on the money you borrow. Typically, construction loans require monthly interest-only payments. The construction loan is a line of credit so you will only pay interest based on the amount borrowed throughout the construction phase.

Building a home can lead to a level of satisfaction that you can’t achieve through buying an existing home and enables you the ability to tailor-make a home to fit your specific needs and desires. If you have the financial ability and partner with a lender who possesses the tools and experience needed to help you through the process of a construction loan, you can achieve what so many dream of – building your own home.

If you’re interested in discussing a construction loan, contact a mortgage lender at CNB. We’ll be happy to meet with you to walk you through the process.


Enter to Win a Char-Broil Gas2Coal Combo Grill and Grilling Package!

char-broil-gas2coal-grillEnter to win by August 30 by visiting the Home Loans section of our website and clicking the Enter to Win ad on the top right. The Home Loans section provides everything you need to know about applying for a mortgage, CNB’s mortgage options, links to our mortgage calculators and even our current rates. Couldn’t you use a new grill to go with a new home?

To enter, simply complete the online entry form. Indicate any products you might be interested in learning more about and submit. The grand prize package which includes the grill, a $50 Omaha Steak gift card, a 3 piece grilling tool set, serving tray, cookbook, towel, seasoning and 2 can coolies, will be drawn on September 1. Good luck!

– See more at:

Ask the Lender – What is an SBA Loan?

Brock Burcham, SVP/Springfield City President

Brock Burcham, SVP/Springfield City President

The Small Business Administration, SBA, offers many types of financing programs geared towards aiding small businesses in growing or starting a business. How these programs work is that the SBA guarantees up to a certain amount of the loan so the bank has less risk in taking on the loan. Citizens National Bank is an approved administrator of SBA loan programs. What that means is the business owner works directly with a lender at our bank and we complete the paperwork to apply for those programs as needed. There are 3 main programs CNB works with: SBAExpress, SBA 7A Guaranteed Loans, and the SBA 504 Loans.

  • The SBAExpress is geared toward small business loans of less than $350,000. The purpose is to start or grow a business. Applications are responded to within 36 hours.
  • The SBA 7A Guaranteed Loan has a maximum loan amount of $5 million. The purpose is to establish a new business or assist in acquisition, operation or expansion of an existing business. Both fixed and variable interest rate structures are available.
  • The SBA 504 Loan has a maximum loan amount of $4-$5.5 million depending upon how funds will be used. It must support one of three goals; job creation, public policy or small manufacturing. Maturity terms of 10 and 20 years are available.

To determine whether or not one of these programs will benefit you, simply contact a CNB business banking officer and discuss your goals for starting or expanding your business. Once we review your financials and business plan, we’ll consider whether SBA financing is a viable option. To learn more about how SBA loan programs work, view our video.


Citizens National Bank’s NEW Home Loans Website Section and Summer Grill Giveaway!

home-loansIn an effort to make it easier for customers to find great information about mortgage and home equity products, Citizens National Bank has officially launched its NEW Home Loans section of the website. The Home Loans section highlights information specific for a first time home buyer, detailed descriptions of loan products offered, a variety of mortgage calculators, and informational articles from mortgage lenders.

Found your dream home? For a first time home buyer, the mortgage loan process can be a thrilling, yet nerve-wracking event. With the new First Time Home Buyers section, you are provided with a description of the available loan options. This section also features the five steps you should take before applying for a home and a variety of informational resources, such as Understanding the Application Process and an Application Checklist.

Also included are mortgage calculators which are useful in determining monthly payments, how much house you can afford and more. These informational and interactive calculators are available as a self-help tool; personalized advice is readily available from any of Citizens National Bank’s qualified professionals.aces-weber-grill

As a thank you for visiting the new Home Loan section, Citizens National Bank is offering monthly drawings for grilling packages from July – September. A grand prize winner will also be drawn in September. Grilling packages include a $50 Omaha Steak gift card, a 3 piece grilling tool set, serving tray, towel, barbecue seasonings, and can coolies. Grand prize is a Weber Grill, courtesy of Lee’s Ace Hardware in Van Wert, with grilling package. Entry is simple – visit the Home Loans section at and fill out the Enter to Win form.

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Ask the Lender – What are SBA loans and how can they help?

Pat Ryan, SVP/Van Wert City President

Pat Ryan, SVP/Van Wert City President

There are many situations when we partner with the Small Business Administration to provide credit to the business community. The most popular program according to our customers is the SBA504 loan program. It allows a business to finance up to 90% of the cost of a project. The most attractive feature is that approximately half of the financing is eligible for a long term fixed rate of interest. The 504 program is very well suited to a real estate or equipment purchase along with construction projects.

Two other SBA programs we utilize are the 7A program and the SBA Express. The 7A program provides additional security to the bank due to the 75% guaranty the SBA provides. This allows a highly leveraged company to expand its operations while providing the bank with a guaranty thereby limiting any potential loss. The SBA Express program is very similar to the 7A program except it has a 50% guaranty and the maximum loan size is $350,000.00. The Express program has a streamlined paperwork process and is perfect for a lot of smaller companies.

One last program to mention is the State of Ohio 166 loan program. The 166 program is very similar to the SBA504, but it is administered through JobsOhio versus the Small Business Administration. The rates and fees are typically less than the SBA504 rates and fees. The only drawback is that the program is limited to manufacturing and warehousing operations. Retail businesses are not eligible to participate.

We highly recommend that every business evaluate all the available loan programs when making a fixed asset purchase or expansion. Many times the benefits of these programs far exceed the costs.

SBA Lending: Under the 7(a) program the SBA will guarantee up to $5mm or 75% of the loan amount, whichever is less. Under the SBA Express program the amount is $350,000 or less and up to 50% of the loan amount. Under the 504 program the SBA through a Certified Development Company (CDC) will fund up to $5mm with 50% financed by a bank, 40% by the CDC and 10% by the business.

Ask the Lender – How can I compare the best options for selecting a mortgage?

Purchasing a home is one of the largest financial commitments you will make in your lifetime. Sometimes it helps to see the numbers in black and white in order to determine what really makes sense for you and your family. Fortunately, Citizens National Bank’s website offers some really invaluable tools to help you compare purchasing options. By using our mortgage financial calculators, you can input your actual financial information to view different scenarios and allow you to make an educated decision about purchasing a home. All these tools are free to use and available 24/7 from our website,

Mortgage Calculators
Adjustable Rate Mortgage Calculator This calculator helps you to determine what your adjustable mortgage payments will be.
ARM vs. Fixed Rate Mortgage Use this calculator to compare a fixed rate mortgage to a Fully Amortizing ARM.
Maximum Mortgage Use this calculator to determine your maximum mortgage and how different interest rates affect your how much you can borrow.
Mortgage Comparison: 15 Years vs. 30 Years Use this calculator to compare these two mortgage terms, and let us help you decide which term is better for you.
Mortgage Loan Calculator Use this calculator to determine your monthly payment and amortization schedule.
Mortgage Points Calculator Should you buy points? Use this calculator to find out.
Refinance Interest Savings Use this calculator to see how much interest you can save by refinancing your mortgage!
Rent vs. Buy Are you better off buying your home, or should you continue to rent?

Check them out and when you are ready to speak with someone about purchasing a home, contact one of our retail lenders!

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.