HOW IT WORKS
A Typical 1,100 Sq. Ft. 3-Bedroom/2-Bath Ranch, 3-Month Home Construction Loan That Turns Into a 30-Year Mortgage! (Upon Occupancy Permit and Appraisal)
The “Homeowner-Builder New Home Construction Loan,” which is “converted” into a final New Home Mortgage loan after completion, also includes a “Home Equity Loan” merged into the final mortgage, (or separate home equity loan agreement) making sure the New Homeowner-Builder gets compensated for their job well done at closing! See examples below. This home equity loan (used by the homeowner-builder for furniture purchases, additional landscaping, home payments or whatever they wish, etc,) is calculated between the market value of the finished home and the cost of construction, while leaving a minimum of 10% equity as the down-payment for the home mortgage.
Example I: (3 bedroom/2 bath)
Home Construction Loan
Appraisal After Completion: $194,000 (2025 Sale Price)
Cost to Build +Land Site: -$129,000 Construction Loan
Gross Profit (Earned Labor): $65,000 Total Home Equity
New Home Mortgage Sale
10% Down Payment: -$19,400 (From Above Home Appraisal)
Remaining Gross Profit: -$45,600 (New Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $194,000
Down Payment (10%)-$19,400
Final Mortgage $174,600 (Includes New Home Equity loan)
Monthly Payment Structure
$174,600 mortgage @ 30-Years adjusted ___% APR
= $1,495 per month (example.)
Example II: (3 bedroom/2 bath)
Home Construction Loan
Appraisal After Completion: $159,000 (2025 Sale Price)
Cost to Build +Land Site: -$121,000 Construction Loan
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 Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $159,000
Down Payment (10%)-$15,900
Final Mortgage $143,100 (Includes New Home Equity loan)
Monthly Payment Structure
$134,100 mortgage @ 30-Years adjusted ___% APR
= $1,286 per month (example.)
Example III: (3 bedroom/2 bath)
Home Construction Loan
Appraisal After Completion: $137,000 (2025 Home Price)
Cost to Build +Land Site: -$108,500 Construction Loan
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 Home Equity Loan)
Final Mortgage Overview:
New Home Sale: $137,000
Down Payment (10%)-$13,700
Final Mortgage $123,300 (Includes New Home Equity loan)
Monthly Payment Structure
$114,300 mortgage @ 30-Years adjusted ___% APR
= $1,106 per month (example.)
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NO PMI included. Total mortgage payment INCLUDES Property Tax Escrow Payment and Homeowners Insurance Payment.
RENTER TO MICHIGAN 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 new homeowners insurance policy 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 sell after completion.
All such home-owner/builders allowed construction categories 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.