Build your home with a construction-to-permanent loan.
When you are building a home, your financing needs to work differently from a traditional mortgage. A Michigan First construction-to-permanent loan combines financing for the construction process with your permanent mortgage in one loan.
With one closing, one set of closing costs and an interest rate locked before construction begins, you can move forward knowing your long-term financing is already in place. Funds are released through scheduled draws as construction progresses, and during construction, you make interest-only payments based on the amount disbursed.
Planning your build? Our Construction Loan Booklet explains the financing process, builder requirements, construction draws and what to expect before and during construction.
How a construction draw loan works
A construction draw loan does not release the full loan amount to the builder at closing. Instead, construction funds are disbursed in stages, called draws, as work on the home is completed.
The process generally works like this:
- You finalize your building plans, budget and construction contract with an eligible builder.
- Michigan First evaluates your application, the builder and the home’s estimated value once construction is complete.
- You close once on both the construction financing and permanent mortgage.
- Funds are released through draws as specific stages of construction are completed.
- During construction, you pay interest only on the amount disbursed when each billing statement is generated.
- Once construction is complete, the loan transitions to regular principal-and-interest payments without a second closing.
Your Mortgage Loan Officer and construction lending team will explain the draw schedule, documentation and inspection requirements for your project.
