HOW IT WORKS
A Typical Home Construction Loan That Turns Into a Mortgage.
The “Homeowner-Builder New Home Construction Loan,” which is carried over and “converted” into the final New Home Mortgage principle after completion, also includes a “Home Equity Loan” merged into the final mortgage, making sure the New Home Owner-Builder gets compensated for their job well done! See examples below. This home equity loan (used by the homeowner-builder for furniture purchases, additional decorating, landscaping, future home payments or whatever they wish,) is calculated between the total mortgage value of the finished home and the cost of construction amount, while leaving 10% in the property as a down-payment for the new home mortgage.
Example A:
Construction Loan
Cost to Build + Land Cost: -$100,000 Construction LOAN
Appraisal After Completion: $150,000 (2024 Home Sale Price)
Gross Profit (Labor Profit): $50,000 Total Home Equity Made
Final Mortgage To Owner-Builder Overview:
New Home Sale: $150,000
Down Payment (10%)-$15,000
Final Sale Price: $135,000 @ 40-Year Mortgage = $1,000 month
* This Mortgage Total of $135,000 Includes a Home Equity Loan of $35,000 rolled into the mortgage total and deposited into the Owner-Builder’s Savings account at closing. Myer then transfers 50% of that remaining $35,000 profit ($17,500) to the Private owner who loaned Myer the land purchase and construction loan.
New Home Mortgage Sale From Bank
(Gross Profit of $50,000)
10% Down Payment: -$15,000
Remaining Earned Equity: -$35,000 (Total of Home Equity Loan)
Monthly Payment Structure
$135,000 mortgage @ 30-Years adjusted ___% APR
= $1,495 per month (example.)
Example I: (3 bedroom/2 bath) + 1.5 Garage
Construction Loan
Appraisal After Completion: $194,000 (2024 Home Sale Price)
Cost to Build +Land Site: -$129,000 Construction Loan Total
Gross Profit (Earned Labor): $65,000 Total Home Equity
New Home Mortgage Sale
10% Down Payment: -$19,400 (From Total Home Equity)
Remaining Earned Equity: -$45,600 (Total of Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $194,000
Down Payment (10%)-$19,400
Final Mortgage $174,600 (loan included in principle amount)
Monthly Payment Structure
$174,600 mortgage @ 30-Years adjusted ___% APR
= $1,495 per month (example.)
Example II: (3 bedroom/2 bath) + 1.5 Garage
Construction Loan
Appraisal After Completion: $159,000 (2024 Home Sale Price)
Cost to Build +Land Site: -$121,000 Construction Loan Total
Gross Profit (Earned Labor): $38,000 Total Home Equity
New Home Mortgage Sale
10% Down Payment: -$15,900 (From Total Home Equity)
Remaining Earned Equity: -$22,100 (Total of Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $159,000
Down Payment (10%)-$15,900
Final Mortgage $143,100 (loan included in principle amount)
Monthly Payment Structure
$134,100 mortgage @ 30-Years adjusted ___% APR
= $1,286 per month (example.)
Example III: (2 bedroom/2 bath) + 1.5 Garage
Construction Loan
Appraisal After Completion: $137,000 (2024 Home Sale Price)
Cost to Build +Land Site: -$108,500 Construction Loan Total
Gross Profit (Earned Labor): $28,500 Total Home Equity
New Home Mortgage Sale
10% Down Payment: -$13,700 (From Total Home Equity)
Remaining Earned Equity: -$14,800 (Total of Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $137,000
Down Payment (10%)-$13,700
Final Mortgage $123,300 (loan included in principle amount)
Monthly Payment Structure
$114,300 mortgage @ 30-Years adjusted ___% APR
= $1,106 per month (example.)
NO PMI included. Total mortgage payment INCLUDES Property Tax Escrow Payment and Home Owners Insurance Payment.
HOMELESS TO HOMEOWNER-BUILDER PROGRAM QUALIFICATIONS must follow the loan required criteria:
You have no other homes, real estate or properties, and are in good physical shape, good health and have no other employment obligations or otherwise, while construction is underway and all construction insurance policies have been written, approved and waiting for starting coverage payment with automatic monthly payments scheduled for the duration of the construction period until canceled by the bank, when the homeowners insurance policy also begins.
MICHIGAN CONSTRUCTION LAWS
Most states, including Michigan, allow individual home owners (or couples or families) to build their own custom built home without needing a home builders license (or other trade licenses) because their “Completed Work and Construction” must PASS home inspections from local building code authorities each step of the way, thereby making sure there are no mistakes and everything “meets or exceeds” all building codes and local home construction requirements.
Even though a “Homeowner-Builder” can elect just to “manage” the construction project only, (just like a general contractor) or, just perform certain sections of the home like painting, flooring, appliances and landscaping (for example) while hiring licensed sub-contractors for all the rest, the homeowner-builder IS ALLOWED BY MICHIGAN LAWS to perform anything or everything they wish! (with the exception of hooking up the incoming electrical service line to their outdoor mounted wire mast from the nearest electrical pole and electrical meter box, any natural gas line service hook-ups, city sewer connections and/or city water line connections must be licensed contractors.)
That’s it!…
The law also states that the Homeowner-Builder, can only provide construction services on their OWN SINGLE-FAMILY HOME, and must live there as their ONLY RESIDENCE (and own NO OTHER vacation homes, dwellings or cottages) for a minimum of 1-year before allowed to selling after completion. All such allowed items include, but not limited to: Foundation work, excavating, basements, crawl spaces, digging, septic tanks, drain fields, cement work, blocks, bricks, carpentry, chimneys, fire places, appliances, hot-tubs, structural framing, post frames, roofing, shingles, sheet metal, insulation, drywall, painting, caulking, plumbing, electrical service panels, breaker boxes, gas or electric furnaces, hot water heaters, AC units, wiring, outlets, switches, lighting fixtures, security, vents, driveways, sidewalks, bathrooms, toilets, showers, bathtubs, doors, windows, water wells, solar panels, flooring and all technical blueprints and designs.