Illinois Considers Permit Ban For Owners With Late Mortgages

For anyone looking to build their dream home from the ground up, or even just tackle a major renovation, the world of construction loans can seem like a winding maze. These short-term, high-interest loans are designed specifically to cover the costs of land, materials, contractor labor, and permits, with funds typically released in carefully timed phases as work progresses. Unlike traditional mortgages, construction loans come with stricter qualification requirements—and, often, a little more paperwork and patience.

According to Bankrate, construction loans are available through a wide range of lenders, including some of the largest national banks. In 2025, the top construction loan lenders, as ranked by Bankrate Scores, include PNC Bank, Wells Fargo, New American Funding, U.S. Bank, First Citizens Bank, TD Bank, and Old National Bank. These institutions received scores ranging from 4.2 to 4.8 stars, reflecting their affordability, availability, and overall borrower experience. But it’s not one-size-fits-all: each lender offers its own perks and pitfalls, and availability can vary widely depending on where you live.

For example, PNC Bank, which scored 4.8, offers a wide range of mortgage products and both online and in-person application options. Its application process is trackable online, but the bank’s mobile app functionality is limited, and it’s not available in every state. Wells Fargo, also scoring 4.8, boasts a massive branch network and will consider non-traditional credit references. It even offers programs to lock in your rate for six to twelve months while your home is under construction. However, the bank has dialed back its mortgage offerings and does not provide home equity lines of credit or home equity loans.

New American Funding stands out for its flexible credit score requirements and down payment options, as well as financing initiatives for Latino, Black, and LGBTQ+ buyers. However, the lowest advertised rates demand a hefty 40% down payment, and lender fees aren’t disclosed online. U.S. Bank, with a score of 4.5, provides up to $1,000 in lender credit for qualifying customers and displays rates online, but has tougher requirements for FHA loans and doesn’t offer USDA loans.

First Citizens Bank, also at 4.5, offers a wide variety of loan options, including special programs for medical professionals, and provides remote notarization and closing services. But its construction loans can’t be used for investment properties, and the best rates require a high credit score and a low debt-to-income ratio. TD Bank, scoring 4.3, features an easy-to-use online rate estimate tool and first-time homeowner assistance, but is only available in 15 states and Washington, D.C., and doesn’t offer construction financing for co-ops or condos. Old National Bank, at 4.2, allows construction loan amounts up to $1 million and offers special programs for first responders, professors, and physicians, though its branch locations are limited and finance charges include a $1,350 origination fee.

So, what does it take to qualify for one of these loans? The requirements are generally more demanding than for a standard mortgage. Most lenders look for a credit score of 680 or higher, though some may consider lower scores. Your debt-to-income ratio usually needs to be no more than 45%, and you’ll likely be asked to put down at least 20% (unless you’re applying for an FHA or VA construction loan). A detailed construction plan is essential, as is a repayment plan—most construction loans convert to a permanent mortgage once the home is finished.

Applying for a construction loan isn’t all that different from applying for a regular mortgage, though it does involve a few extra steps. After reviewing requirements and shopping around for lenders and rates, you’ll need to submit your loan application along with a contractor agreement and plans from your architect or builder. Lenders want to know not just the cost of the build, but also the scope of the work and the timeline. Staying responsive and organized throughout the process can help you avoid delays and keep your project moving forward.

There are several types of construction loans to consider. A construction-to-permanent loan covers the build and then converts to a permanent mortgage once the home is ready for occupancy. A construction-only loan, by contrast, pays for the build in increments as milestones are met, but typically must be repaid within a year. Owner-builder construction loans are similar, but the borrower is also the builder. Finally, the end loan is the mortgage that takes over once construction is complete.

It’s worth noting that construction loan interest rates are generally higher than those for standard home purchases. That’s because, in a build situation, there’s no completed home to secure the loan, making it riskier for lenders. While qualifying for a construction loan isn’t necessarily harder than for a traditional mortgage, the process can be more involved, requiring more paperwork about the build and contractor, as well as strict adherence to the lender’s timeline, inspections, and payout requirements.

But the landscape for property owners—especially those with rental units—may be about to get more complicated in Illinois. According to a report published on January 28, 2026, Democratic Rep. Mary Gill has filed Illinois House Bill 4589, which would prevent apartment building owners from obtaining building permits if they are late or in default on their mortgage payments. The bill seeks to amend both the Illinois Counties Code and the Illinois Municipal Code, and would apply only in counties with populations of 500,000 or less and 200,000 or less.

If passed, the legislation could have significant implications for landlords and renters alike. For example, if an apartment building needs urgent structural repairs, an HVAC replacement, or even routine unit upgrades, permits would not be issued unless the owner is current on their mortgage. This could delay important improvements to rental units, potentially affecting the safety and comfort of tenants.

However, the bill leaves several key questions unanswered. It does not specify how a building owner would prove their mortgage payments are up to date, nor does it clarify whether the responsibility for confirming this status would fall to the county or the owner. Would owners need to provide bank records or other documentation? Or would local governments be tasked with verifying payment status? These ambiguities have left many in the real estate and construction industries waiting for further guidance.

The proposed legislation is part of a broader trend toward tightening regulations on property owners and lenders, as policymakers seek to ensure financial responsibility and protect tenants from the fallout of landlord defaults. But some critics argue that the bill could have unintended consequences, such as discouraging necessary repairs or upgrades to aging rental stock, especially in smaller counties where resources are already stretched thin.

As the debate over Illinois House Bill 4589 unfolds, property owners, tenants, and lenders alike will be watching closely. In the meantime, anyone considering a construction or renovation project—whether in Illinois or elsewhere—would be wise to brush up on the latest lending requirements, shop around for the best rates, and stay on top of their paperwork. After all, in the world of home construction and improvement, a little preparation can go a long way.

With new lending standards and legislative changes on the horizon, the path to building or improving a home in 2026 is as challenging as ever, but for those willing to navigate the process, the rewards can be well worth the effort.