Construction Loans
Finance the construction of your new home with a single-close construction-to-permanent loan. Lock your rate before breaking ground.
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Single-Close Construction Loans in Michigan
A single-close construction loan — also called a construction-to-permanent loan or one-time close loan — finances both the construction of your new home and the permanent mortgage in a single loan with a single closing. This eliminates the risk and cost of a two-close process (a separate construction loan followed by a permanent mortgage) and protects you from rate changes between the time you break ground and the time you move in.
How Construction-to-Permanent Works
During the construction phase, you make interest-only payments on the funds that have been drawn from the loan — you are not paying interest on the full loan amount, only on what has been disbursed to the builder. When construction is complete and the home passes its final inspection, the loan automatically converts to a permanent mortgage — typically a 30-year fixed — without requiring a new application, new appraisal, or second closing. Your interest rate is locked at the original closing, so you are protected from rate increases during the build period.
Draw Schedules and Builder Approval
Funds are disbursed to the builder in stages called draws, typically tied to construction milestones — foundation complete, framing complete, mechanical rough-in complete, and so on. Before each draw is released, an inspector verifies that the work has been completed as specified. The builder must be approved by the lender before construction begins, which involves reviewing the builder's license, insurance, and financial stability. Working with an experienced, licensed Michigan builder simplifies the approval process significantly.
Rate Lock During Construction
One of the most significant advantages of a single-close construction loan is the rate lock. With a two-close process, you take out a construction loan at today's rate and then apply for a permanent mortgage when construction is complete — at whatever rate is available at that time. With a single-close loan, your permanent rate is locked at the original closing. In a rising rate environment, this protection can be worth thousands of dollars over the life of the loan.
Frequently Asked Questions
Do I need to own the land first?
Not necessarily. Many single-close construction loans allow you to purchase the land and finance the construction in the same loan. If you already own the land, its equity can be used as part of your down payment. Your loan officer will structure the loan based on your specific land ownership situation.
How are draws disbursed during construction?
Funds are released to the builder in stages tied to construction milestones. An inspector verifies completion of each stage before the draw is released. You make interest-only payments on the drawn funds during construction.
Can I act as my own general contractor?
Some lenders allow owner-builder arrangements, but most require a licensed general contractor. Owner-builder loans are available through specialty lenders and typically require demonstrated construction experience. Your loan officer will identify lenders who accommodate owner-builder scenarios if that is your plan.
When does my mortgage payment start?
During construction, you make interest-only payments on the drawn funds. Full principal and interest payments begin after the loan converts to the permanent mortgage at construction completion — typically when you receive your certificate of occupancy.
Why Michigan Mortgage Solutions?
We've been helping Michigan families achieve homeownership since 1999. Here's what sets us apart.
Practice Purchase™ System
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Expert Team of 5 Loan Officers
From first-time buyers to seasoned investors, our specialists match you with the right expert for your situation.
Same-Day Approvals Available
Get a verified pre-approval letter the same day in many cases, so you can make competitive offers with confidence.
Access to 50+ Lenders
As a broker, we shop your loan across dozens of lenders to find the best rate and terms, not just one bank's products.
Specialty & Hard-to-Place Loans
Self-employed? Low credit? High DTI? ITIN? We have programs for borrowers other lenders turn away.
Step-by-Step Guidance
We guide you from first conversation to closing day, no guesswork, no surprises, just clear communication.
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