Construction Loans in Michigan

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5 Best Construction Loans in Michigan

Key Terms

  • Michigan construction loans are available for both commercial and residential properties, with interest rates ranging from 3% to 8%, depending on the lender and the borrower’s creditworthiness.
  • The loan terms for Michigan construction loans typically range from six months to two years, and borrowers must provide detailed plans and cost estimates for their project to qualify for financing.
  • The article provides helpful tips and guides for borrowers seeking Michigan construction loans, including information on the documentation and requirements needed to secure financing and the benefits of working with experienced lenders.

When you think of Michigan, you think of Detroit and Motor City, but did you know that the state also has over 11,000 lakes? Many people have been moving to Michigan over the past decade and some homebuyers are choosing to use a construction loan to build their dream home or vacation property.

The most recent real estate report from the Michigan Realtors Association pegs that average sales price for a house in Michigan at $253,557. But when it comes to home construction, you can expect to pay $90 to $150 per square foot in Michigan per industry sources. Given those prices, you wouldn’t be crazy for wanting to build something yourself rather than purchasing an existing property.

Construction loans are different from traditional mortgages in that the loan amount is based on the estimated value of the property once it’s finished rather than the purchase price. They also involve a different process of checks during the construction process. If you’re considering a construction loan in Michigan, read on to learn about the benefits along with a list of lenders in the state.

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Advantages of a taking out a construction loan in Michigan

With a construction loan, you can secure financing for everything from the initial cost of the land through the more problematic aspects, like plumbing, foundation and electrical work. Plus, with a construction loan, you choose the lender that best suits your needs and the lender becomes a partner in the construction loan process since they have a vested interest in seeing a completed house.

The process of construction financing can be much more streamlined for borrowers than the process of getting a traditional home loan. This is because the lender is taking on less risk by lending money short-term.

This quick underwriting and approval process can significantly benefit home builders and property buyers alike. It can allow home builders to get started on their projects quickly and give property buyers the peace of mind that they will be able to purchase their dream home without waiting weeks or months for approval. 

However, eventually you will convert your home construction loan into a traditional mortgage loan, so consider the long run as you make a decision about taking out a construction loan.

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5 Best Michigan construction loans lenders

If you’re ready to check out the top construction loan lenders in Michigan, here are the best options we’ve found through our research.

1. Warsaw Federal

Warsaw Federal started in 1893 in Cincinnati, Ohio but now offers services in many locations throughout the country, including Indiana. They’ve been providing mortgages for over 100 years, so naturally can assist with your construction product.

We corresponded with a loan officer at Warsaw Federal to learn more about their construction loan options and here is what we found:

  • Minimum 700 credit score required
  • 5% down payment up to $548,000
  • 10% down up to $900,000
  • 20% down up to $2,000,000
  • 25% down on Lot Loans
  • One-Time Closing! Loans convert to permanent financing at the end of construction
  • Construction periods of 8-12 months
  • 5/1, 7/1, 10/1 ARMs (adjustable rate mortgages) amortized over 30 years
  • Both stick-built and modular homes are eligible
  • No Self Builds must use an approved builder. 
  • The loan balance may be paid down until the final draw, reducing the mortgage amount and the monthly payment will be based on the new principal balance.

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

2. Lake Michigan Credit Union

Lake Michigan Credit Union is based in Michigan but also lends in Florida. Not surprisingly, Lake Michigan has a construction loan product for those that want to build a dream home in either Michigan or Florida. 

We contacted Lake Michigan Credit Union to learn more about their construction loan product and this is what they said:

  • One-Time Closing. Only pay closing cost once
  • Lock in your rate upfront and avoid interest rate risk
  • 5% down 
  • Loans up to $2,000,000
  • 15-yr & 30-yr fixed or 3/1, 5/1, 7/1, 10/1 AMR’s amortized over 30 years 
  • Interest-only during the construction period
  • Escrows not required during the construction period
  • Equity bridge loans available
  • No minimum credit score
  • No self build or owner builders. The builder must be approved. 

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

3. Honor Bank

Honor Bank is based in Traverse City and is a local community bank dedicated to serving customers throughout northern Michigan, with a full suite of financial products, including savings accounts, small business loans, home equity loans, money market accounts, credit cards and of course, construction loans.

We reached out to Honor Bank to learn more about the construction loan that they offer. Here are a few highlights:

  • During the construction period you pay interest only on the funds that have been advanced.
  • When your construction is complete, convert your loan into permanent financing with a fixed- or adjustable-rate option.
  • Financing is available for primary residences, second homes, investment properties, double-wide manufactured homes, and modular homes.
  • Project timelines: 3-12 months, depending on the project and loan program
  • Periodic draws during the construction period.
  • When the home is 45-60 days away from completion, Honor Bank will obtain updated loan documentation.
  • When the completion certificate is issued, Honor Bank orders the final appraisal inspection

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

4. Arbor Financial Credit Union

Arbor Financial Credit Union got its start in 1935 helping teachers with financial services. Fast forward to today and the bank is serving families and business owners in southwest Michigan, including construction loans.

We contacted Arbor Financial Credit Union to learn more about their construction loan and this is what we found out:

  • One-time closing costs
  • Fixed-rate loans available
  • Pay only interest during construction phase
  • Options to eliminate private mortgage insurance (PMI) available
  • Financing terms from 10 to 30 years
  • Loan serviced by Arbor Financial so you will always speak to someone local if you have questions

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

5. Wintrust Mortgage

Wintrust Mortgage is one of the top 20 bank-owned retail mortgage originators in the country that originates in excess of $4 billion in loans annually in all 50 states. 

Recently we asked Wintrust Mortgage to provide us with details on their construction loan and this is what they said:

  • One-Time Closing. Only pay the closing cost once
  • Lock in your rate upfront and avoid interest rate risk
  • FHA, VA, and Conventional options
  • 0% Down up to $822,375 (VA ONLY)
  • 3.5% Down up to FHA County Limits ($356,362-822,375) 
  • 10% Down on Second homes
  • FICO 680+
  • Loans must include building no Lot/Land Loans 
  • Maximum of 10-acres per build site
  • Stick Built and Modular Homes ONLY
  • NO log homes or metal homes (barndominium)
  • Tear Down and Rebuilds do qualify
  • No self-build or owner builders. The builder must be approved. 
  • Does Not allow ADUs (Accessory Dwelling Unit – Granny Flat/Garage Conversions/Basement)
  • Now lending in all 50 States

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

Should you pursue a construction loan in Michigan?

Construction loans can be a great way to finance the construction of your new home. The best part is that you can typically get these loans with a short turnaround time, making it possible to start building your home without delay. You’ll also have a flexible payment plan once the construction is complete, so you can afford to move in comfortably.

If you are considering getting a construction loan to finance your new home, working with an experienced construction loan expert is critical. You want someone who has years of experience getting homes built. They will be able to advise you on the best way to finance your project.

Looking for a construction loan in a different state?

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Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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