Most construction-to-permanent loans on custom homes in Michigan require a down payment of roughly 20% of the total project cost, with some programs allowing less. Closing costs on new construction typically run 2% to 5% of the purchase price. At Oaks of Tyrone in Tyrone Township, the wooded one-acre homesite is included in the home package, so buyers finance the land and the house together in a single construction-to-permanent loan.
How much down payment do construction lenders require in Michigan?
Down payment requirements on new construction follow the same general ranges as purchase mortgages, with a few program-specific differences. These are market ranges, not quotes: every lender sets terms based on the buyer's credit, income, and total project cost.
For a conventional construction-to-permanent loan on a primary residence, lenders typically ask for 20% to 25% of the total project cost, which is the land plus construction. Some conventional programs allow as little as 5% for well-qualified buyers. FHA one-time-close loans allow a 3.5% down payment for qualified buyers, and VA loans allow 0% down for eligible veterans. Jumbo construction loans commonly require 10% down up to about $1.25 million and 20% above that. Owner-builder loans, where the buyer acts as their own general contractor, often require 30% or more because the lender is taking on more risk.
The practical takeaway: plan for 20% down and you will be positioned for the widest range of programs and the most competitive rates. If you qualify for a lower-down-payment program, that is a bonus, not a plan. Our guide to financing a custom home on a wooded lot walks through how construction loans work in detail.
Why the lot-included package at Oaks of Tyrone simplifies the math
On a raw-land build, the land is often purchased separately, which means a separate down payment, a separate land loan, or cash tied up in the lot before construction even starts. At Oaks of Tyrone, the wooded one-acre homesite is included in the home package price, which starts at $629,900 for the Firethorn ranch plan. The lot is wrapped into the total project cost from day one, so the construction-to-permanent loan covers the entire package, home and land together.
That changes the down payment math in a meaningful way. Instead of saving for a land purchase on top of a construction loan, buyers put one down payment on one combined package. The community septic system and infrastructure are engineered as part of the build, so there are no surprise well-and-septic site contracts to fund separately. Buyers work with Big Sky Development's vetted lender partners, including preferred lender Todd Murawski, who handles new construction financing every day.
What are typical closing costs on new construction in Michigan?
Michigan buyers typically pay about 2% to 5% of the purchase price in closing costs on new construction. On a $629,900 home package, that works out to roughly $13,000 to $31,000, depending on the lender, the title company, and the timing of your closing. The main pieces are the lender fees, title and escrow services, recording fees, and prepaid items such as property taxes and homeowners insurance.
New construction closings can also include builder-specific items, so it pays to ask for a written estimate early. A fixed-price contract, like the one Big Sky Development signs with every buyer at Oaks of Tyrone, keeps the construction side of the budget predictable. The closing side is where a good lender earns their keep by walking you through each line item before you commit. For a full picture of what the package includes, see our breakdown of what $629,900 gets you at Oaks of Tyrone.
Other cash to plan for before move-in
Beyond the down payment and closing costs, a custom build has a few cash items that catch buyers off guard. During construction you pay interest only on the amount drawn so far, not the full loan balance, but you should still budget for those monthly payments while you are also carrying your current housing costs. Property taxes on the new home begin once the home is assessed, and the annual HOA at Oaks of Tyrone is $1,177, covering common area maintenance and community upkeep.
Builder's risk insurance protects the structure during construction and typically costs a fraction of a percent of the build value, and moving, window treatments, and initial landscaping are real line items too. If you are selling a current home to fund the build, our guide to selling before you build covers equity timing and rent-backs.
How pre-approval helps you choose a homesite with confidence
Getting pre-approved before you tour homesites does two things. It tells you exactly which price range to compare, and it lets you move quickly when you find the right wooded acre. At Oaks of Tyrone, 34 homesites sit on Timber Trail, each a full wooded acre with mature trees preserved, and lot premiums range from $0 to $50,000 based on position, views, and privacy. Knowing your approved amount before you walk the lots means you can compare homesites on their merits rather than guessing at the budget.
Big Sky Development's design team can then match a floor plan to both the land and your approved budget, and the fixed-price contract locks the number in before construction begins. The typical build runs 8 to 12 months from contract to move-in, so the financing you secure at the start is the financing that carries you to closing.
Frequently asked questions
Can I finance the lot and the home together at Oaks of Tyrone?
Yes. The wooded one-acre homesite is included in the home package price, so the land and the house are financed together in a single construction-to-permanent loan. There is no separate land purchase or land loan to arrange.
How much down payment do I need for a custom home in Michigan?
Conventional construction-to-permanent loans typically require about 20% of the total project cost. Some conventional programs allow less for well-qualified buyers, FHA allows 3.5% down, and VA allows 0% for eligible veterans. Your lender will confirm the exact requirement for your situation.
How much should I budget for closing costs on new construction?
Buyers typically pay about 2% to 5% of the purchase price in closing costs on new construction in Michigan. On a $629,900 home package that is roughly $13,000 to $31,000, covering lender fees, title, recording, and prepaid taxes and insurance.
Do I pay two mortgages during construction?
No. A construction-to-permanent loan covers the build and converts to a permanent mortgage at closing, so you have one loan and one set of closing costs. During construction you pay interest only on the amount drawn so far.
Does the down payment at Oaks of Tyrone include the lot?
Yes. Because the wooded one-acre homesite is included in the home package price, your down payment is calculated on the combined package, not on a separate land purchase. That is one of the ways the lot-included model keeps the financing straightforward.
Run the numbers on your custom home
The fastest way to get real numbers is to talk to someone who finances new construction every day. Schedule a tour with Rob Moen at Oaks of Tyrone, walk the wooded one-acre homesites, and get connected with preferred lender Todd Murawski for a pre-approval that fits your plan. Rob is at 810-691-0019 and ready to walk you through the budget, the lots, and the building process.