By CBH Building & Development
Understanding Construction Loans
Unlike buying an existing home, building new often requires a construction loan. These short-term loans cover the cost of building and then convert into a traditional mortgage once the home is complete. Lenders will release funds in stages (called “draws”) as different phases of construction are finished.
Down Payments and Loan Requirements
Michigan lenders typically require higher down payments for construction loans—often between 10% and 20%. Buyers should also expect more detailed financial reviews, since the lender is taking on the risk of financing a project not yet built.
Closing Costs and Fees
In addition to the down payment, buyers need to budget for closing costs. These may include lender fees, appraisal costs, title insurance, and inspection fees. Factoring in these expenses early helps prevent financial surprises down the road.
Long-Term Mortgage Options
Once construction is complete, the loan usually transitions into a standard mortgage. Buyers can choose fixed-rate or adjustable-rate mortgages, depending on their long-term financial goals.
The CBH Advantage
At CBH Building & Development, we work closely with clients and their lenders to streamline the financing process. By coordinating timelines and documentation, we help keep projects on budget and moving forward.