Build Your Custom Home
The home of your dreams brings endless possibility.
Expert loan officers
Interest-only payments during construction
Lock in your interest rate
Making Custom Homes Possible
Building the home of your dreams delivers endless possibilities but the process can feel a little daunting. Michigan First Mortgage offers construction loans, provided by a knowledgeable and proactive team of loan officers, processors, and underwriters. We work together to ensure the process is smooth, efficient, and enjoyable. We’re part of Michigan First Credit Union, which has a 90-year history of serving members with integrity, value, and personalized attention.
Construction Loan Features Include:
- Combine your construction and permanent mortgage into one loan.
- Save time and money with one closing.
- Interest-only payments during construction.
- Include the purchase of your lot in the financing or build on a lot you already own.
- Utilize your land value for equity.
- Lock in your interest rate before construction begins, giving you added protection if rates rise.
Common Questions
Q. What is a Construction-to-Permanent Loan?
A. A construction-to-permanent loan is a single-close loan that includes 12 months of construction financing plus up to 30 years of end financing in one loan. For example a 30 year Construction-to-Permanent Loan with Michigan First Mortgage includes a 12-month construction period, as well as a 30-year principal and interest period. The Construction-to-Permanent Loan has only one closing, one set of closing costs and the loan terms including the interest rate remain the same throughout the life of the loan.
Q. Do I have to sign new documents once my home is complete and I am ready to start my permanent payments?
A. No, that’s the benefit of our Construction-to-Permanent Loan. Your loan documents were created specifically to cover both the constructing and permanent phases of your loan. You can rest assured that you have permanent financing when your home is complete.
Q. When does the construction loan term begin?
A. Construction-to-Permanent Loans have a construction term of 12 months. The loan term begins on the date the note is signed.
A. A construction-to-permanent loan is a single-close loan that includes 12 months of construction financing plus up to 30 years of end financing in one loan. For example a 30 year Construction-to-Permanent Loan with Michigan First Mortgage includes a 12-month construction period, as well as a 30-year principal and interest period. The Construction-to-Permanent Loan has only one closing, one set of closing costs and the loan terms including the interest rate remain the same throughout the life of the loan.
Q. Do I have to sign new documents once my home is complete and I am ready to start my permanent payments?
A. No, that’s the benefit of our Construction-to-Permanent Loan. Your loan documents were created specifically to cover both the constructing and permanent phases of your loan. You can rest assured that you have permanent financing when your home is complete.
Q. When does the construction loan term begin?
A. Construction-to-Permanent Loans have a construction term of 12 months. The loan term begins on the date the note is signed.
Q. Do we have to own the lot free and clear?
A. No. If you do not own the lot free and clear when applying for the Construction-to-Permanent Loan, Michigan First Mortgage will pay the lot off at the closing.
Q. If we already own our lot, how do we determine how much we can borrow?
A. Generally, you will be able to borrow a percentage of the future value of the house, regardless of how long you’ve owned the lot or the total cost of the build. Lot equity can be used as a source of down payment as long as the appraisal value is adequate.
A. No. If you do not own the lot free and clear when applying for the Construction-to-Permanent Loan, Michigan First Mortgage will pay the lot off at the closing.
Q. If we already own our lot, how do we determine how much we can borrow?
A. Generally, you will be able to borrow a percentage of the future value of the house, regardless of how long you’ve owned the lot or the total cost of the build. Lot equity can be used as a source of down payment as long as the appraisal value is adequate.
Q. What does an appraiser appraise?
A. The appraiser uses the plans and specifications provided by the builder, along with the vacant property on which the house is to be built, to determine what the value of the property will be once construction is complete.
Q. What if the appraised value is lower than expected?
A. Appraisers do a very good job of determining fair value. In the event that the appraised value is lower than expected, you may be required to bring additional funds to close. This will depend upon the resulting loan-to-value ratio once the appraised value has been determined. Should a low appraised value occur, your loan officer will discuss the options with you.
A. The appraiser uses the plans and specifications provided by the builder, along with the vacant property on which the house is to be built, to determine what the value of the property will be once construction is complete.
Q. What if the appraised value is lower than expected?
A. Appraisers do a very good job of determining fair value. In the event that the appraised value is lower than expected, you may be required to bring additional funds to close. This will depend upon the resulting loan-to-value ratio once the appraised value has been determined. Should a low appraised value occur, your loan officer will discuss the options with you.
Q. Can I select any builder I want?
A. Before Michigan First Mortgage will provide construction financing for a project, the builder/general contractor must be on the Michigan First Mortgage Builder Activation list. To be added, each builder is required to complete the Michigan First Mortgage Builder Application process. Please refer to ‘Builder Activation Process’ on page 5 in the Construction Loan Booklet for more details.
Q. Can I act as my own builder/general contractor?
A. Michigan First Mortgage offers the ability to “self-build” a personal residence to licensed general contractor/builders with current experience as a residential home builder. You should contact your Michigan First Mortgage loan officer for details.
A. Before Michigan First Mortgage will provide construction financing for a project, the builder/general contractor must be on the Michigan First Mortgage Builder Activation list. To be added, each builder is required to complete the Michigan First Mortgage Builder Application process. Please refer to ‘Builder Activation Process’ on page 5 in the Construction Loan Booklet for more details.
Q. Can I act as my own builder/general contractor?
A. Michigan First Mortgage offers the ability to “self-build” a personal residence to licensed general contractor/builders with current experience as a residential home builder. You should contact your Michigan First Mortgage loan officer for details.
Q. How do payments work during the construction phase of the loan?
A. You’ll pay interest only on the principal balance disbursed when the billing is generated.
Q. What if the project costs are more than estimated?
A. Cost overruns are a legitimate concern. Overruns can occur due to unforeseen circumstances or change orders for extras added by you as the project is built. All cost overruns and change orders that increase the overall cost of construction must be paid out of pocket by you.
A. You’ll pay interest only on the principal balance disbursed when the billing is generated.
Q. What if the project costs are more than estimated?
A. Cost overruns are a legitimate concern. Overruns can occur due to unforeseen circumstances or change orders for extras added by you as the project is built. All cost overruns and change orders that increase the overall cost of construction must be paid out of pocket by you.
Q. Can your programs be used to finance major remodels or even a “teardown?”
A. Yes. In this case, the amount that can be borrowed is based on the future value of the property, after the construction or remodel is complete. If you are contemplating a teardown or extensive remodel, you should discuss these plans with your loan officer.
Q. Do we need to sell our current home before building a new home?
A. Not necessarily. Consult with your loan officer. Michigan First Mortgage has financing options to assist, such as bridge loans.
A. Yes. In this case, the amount that can be borrowed is based on the future value of the property, after the construction or remodel is complete. If you are contemplating a teardown or extensive remodel, you should discuss these plans with your loan officer.
Q. Do we need to sell our current home before building a new home?
A. Not necessarily. Consult with your loan officer. Michigan First Mortgage has financing options to assist, such as bridge loans.
