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New Construction One-Time Close • Build on Your Lot

Construction Loans
in Michigan.

Building a home in Northern Michigan is one of the most rewarding things a buyer can do -- and one of the most complex to finance. One-time close construction loans combine your build financing and permanent mortgage into a single transaction. One approval. One closing. One set of costs. We have done a lot of these and we know how to get them closed.

Talk to Kirby or Angie Start Your Pre-Qual
Quick Answer

A construction loan finances the building of a new home from ground up. A one-time close construction-to-permanent loan combines the build phase and the permanent mortgage into a single loan -- one closing, one set of fees, one lock. During construction you pay interest only on funds drawn. When the home is complete, the loan converts automatically to a standard mortgage. Available as conventional, FHA, VA, and USDA depending on eligibility. Land can be purchased as part of the same transaction.

1
Closing Required
Interest
Only During Build
Auto
Converts at Completion
Land
Can Be Included
4
Program Options

Construction Lending in
Northern Michigan

Building in Northern Michigan is different from building in the suburbs of a major city. The lots are bigger, the builders are smaller, the timelines can be affected by weather in ways that do not show up in a standard build schedule, and the appraiser has to find comparable new construction sales in markets where new construction is not always abundant.

We know this market. Construction lending is a meaningful part of what Kirby and Angie do -- not a niche product we dust off once a year. We know which builders work well with lenders, we know how to structure draw schedules for Northern Michigan builds, and we know how to handle the appraisal process in markets where finding true comps requires some expertise.

If you are thinking about building -- whether you already own land or are starting from scratch -- the conversation starts well before you have a signed builder contract. The earlier we talk, the smoother the process goes.

One-Time Close vs. Two-Close -- Why It Matters

Traditional construction lending involves two separate closings -- a construction loan to finance the build, and then a permanent mortgage to pay off the construction loan once the home is complete. Two closings means two sets of closing costs, two approval processes, and two opportunities for something to go wrong between the build phase and the permanent financing.

One-time close construction-to-permanent loans eliminate the second closing entirely. You close once, lock your permanent rate at the start, and the loan automatically converts to a standard mortgage when construction is complete. You know your permanent payment before you break ground -- which makes budgeting and planning significantly more straightforward.

What You Need to Get Started

  • A licensed, insured builder with a signed or draft construction contract
  • Plans and specifications for the home -- or the ability to provide them
  • Land owned or being purchased -- equity in owned land can count toward down payment
  • 620+ credit score for conventional (VA and USDA follow their own guidelines)
  • Sufficient income to qualify for the permanent loan amount
  • Reserves -- typically more than a standard purchase loan requires
  • A realistic construction timeline -- most Northern Michigan builds run 6-12 months

Construction Loan Basics

Loan TypeOne-time close
ProgramsConv, FHA, VA, USDA
During BuildInterest only on draws
After BuildAuto-converts to perm
Land PurchaseCan be included
Builder RequirementLicensed & approved
Typical Timeline6-12 months to build

Ready to Talk About Building?

The earlier in the process we connect, the smoother it goes. Even if you do not have a builder or plans yet, we can walk you through what to expect and how to set yourself up for a clean approval.

Free Consultation Start Pre-Qual

One-Time Close vs. Two-Close Construction Loans

Why most buyers choose the one-time close option.

One-Time Close

Recommended
  • Single closing -- one set of closing costs
  • Rate locked at closing before construction begins
  • Automatic conversion to permanent mortgage at completion
  • No re-qualification required after build
  • Less paperwork, less risk, fewer moving parts
  • Available as conventional, FHA, VA, and USDA

Two-Close Construction

Traditional Approach
  • Two separate closings -- two sets of closing costs
  • Rate on permanent loan not locked until after build
  • Must re-qualify for permanent loan at completion
  • More flexibility on permanent loan terms
  • Higher total transaction cost
  • Rate risk during construction period

Construction Loan Programs -- Which One Fits

Four program options depending on your eligibility and down payment situation.

Conventional

Most Common
  • 620+ credit score
  • Typically 5-20% down
  • No income limits
  • Most property types
  • PMI if less than 20% down
  • Flexible builder requirements

FHA

Low Down Payment
  • 580+ credit score
  • 3.5% minimum down
  • More forgiving on credit
  • MIP for life of loan (typically)
  • Strict property standards
  • Good for first-time builders

VA

Veterans Only
  • Zero down for eligible veterans
  • No monthly mortgage insurance
  • Competitive rates
  • VA property requirements apply
  • Builder must be VA approved
  • One-time funding fee applies

USDA

Rural Areas
  • Zero down in eligible areas
  • 640+ credit score typical
  • Household income limits apply
  • Property must be USDA-eligible
  • Low annual guarantee fee
  • Much of Northern MI qualifies

How Construction Draws Work

Funds are released in stages as construction milestones are completed and inspected.

1
Closing Draw

Initial funds released at closing to cover land payoff (if applicable), permits, site preparation, and builder mobilization costs.

2
Foundation Draw

Funds released after foundation is poured and inspected. This is typically the first major milestone inspection.

3
Framing Draw

Funds released after framing is complete and the home is dried in -- walls, roof structure, and sheathing in place.

4
Rough Mechanicals Draw

Funds released after rough plumbing, electrical, and HVAC are completed and pass rough inspection.

5
Drywall / Interior Draw

Funds released after drywall is hung and the home is substantially enclosed. Interior finishes are underway.

6
Completion Draw

Final funds released after the home passes final inspection, certificate of occupancy is issued, and the appraiser confirms substantial completion. Loan converts to permanent mortgage.

How the Construction Loan Process Works

From first conversation to moving into your new Northern Michigan home.

1

Start the Conversation Early

Construction loans have more moving parts than standard purchase loans. The earlier we connect -- even before you have a signed builder contract -- the smoother the process. We walk you through qualification requirements, what to look for in a builder, and how to structure the land and construction components together.

2

Pre-Qualification and Program Selection

We look at your credit, income, assets, and land situation to determine which program -- conventional, FHA, VA, or USDA -- gives you the best structure for your build. If you have land equity, we factor that into the down payment picture.

3

Builder Approval and Documentation

Your builder provides license, insurance, and references. We review the construction contract, plans, specs, and draw schedule. Builder approval is a required step -- we let you know quickly whether your builder qualifies or what additional documentation they need.

4

Appraisal on Plans and Specs

The appraiser values the completed home based on plans, specs, and comparable new construction sales. This is a more complex appraisal than a standard purchase and we work with appraisers experienced in Northern Michigan new construction.

5

Close and Break Ground

Once approved, you close on the construction loan. Your permanent rate is locked. Land and initial costs are funded. Your builder pulls permits and breaks ground.

6

Draws, Inspections, and Completion

As construction progresses, we manage the draw process -- coordinating inspections and fund releases at each milestone. You pay interest only on amounts drawn during the build period.

7

Conversion to Permanent Mortgage

When construction is complete, the certificate of occupancy is issued, and the final inspection is passed, the loan automatically converts to your permanent mortgage. Your first regular payment begins on schedule. Welcome home.

Frequently Asked Questions

A one-time close construction loan combines the construction financing and the permanent mortgage into a single loan with one closing and one set of closing costs. During construction you pay interest only on draws taken. When the home is complete, the loan converts automatically to a standard mortgage with principal and interest payments. You lock your permanent rate before the build begins -- so you know your payment before you break ground.
Yes -- both VA and USDA offer one-time close construction loan programs. VA construction loans allow eligible veterans to build with no down payment. USDA construction loans allow zero-down builds in eligible rural areas for borrowers within income limits. Both require the builder to be approved and the property to meet program standards. Much of Northern Michigan's rural territory is USDA-eligible, and VA construction is available statewide for qualifying veterans.
No -- land can be purchased as part of the construction loan transaction. If you already own the land free and clear or with equity, that equity can often count toward your down payment requirement. If you are purchasing land and building simultaneously, we structure both into a single loan package. We see both scenarios regularly in Northern Michigan.
Construction loans have a set build period -- typically 6-12 months. If the build takes longer than the original timeline, an extension can often be requested. Extensions are not guaranteed and may involve additional fees. In Northern Michigan, winter weather is a legitimate factor in construction timelines and we build appropriate buffer into the schedule from the start rather than having to scramble for extensions later.
The builder must be licensed in Michigan, properly insured, and approved by the lender. Most established licensed builders qualify without issue. We review builder documentation -- license, insurance certificate, references, and their standard contract -- early in the process. If you have a builder in mind, give us their name and we will tell you quickly whether they are likely to meet requirements or what they need to provide.
Owner-builder scenarios -- where the buyer serves as their own general contractor -- are generally not eligible for standard construction-to-permanent loan programs. Most lenders require a licensed, third-party general contractor. If you are an experienced licensed contractor yourself, there may be limited exceptions -- call us and we can discuss your specific situation.
Credit score requirements vary by program. Conventional construction loans typically require 620-680+. FHA construction follows FHA guidelines (580+ with 3.5% down). VA construction follows VA guidelines (typically 580-620+). USDA construction typically requires 640+. Construction loans generally have slightly tighter qualification standards than standard purchase loans because of the additional complexity involved.

Building in Northern Michigan?
Let's Talk Before You Break Ground.

Construction financing works best when the conversation starts early. Whether you have land, a builder, and plans -- or just an idea -- we can walk you through what the financing looks like and what you need to make it happen.

Talk to Kirby or Angie Start Your Pre-Qual

Kirby and Angie Mortgage Loan Team | Union Home Mortgage | NMLS #2229229 | Angie Anderson NMLS #1999286 | Kirby Slocum NMLS #680817 | Licensed in Michigan, Ohio, and Indiana | Equal Housing Lender. Construction loan availability, draw schedules, builder requirements, and program eligibility subject to lender guidelines and program requirements. Construction timelines are estimates only. All loans subject to credit approval and underwriting review. Information provided is for educational purposes and does not constitute a loan commitment or guarantee of financing.