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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.