GRAFTON (AP) - This Walsh County town of about 4,600 and its largest employer are joining in a project to help people build homes.

Susan Marvin, president of Marvin Windows and Doors, announced Tuesday that the company is contributing up to $500,000 to a fund to be managed by the city. Officials said the money would be used for loans to homeowners who build in Grafton, and the loans would be forgiven if they live there for 10 years.

"We'd like that money to help people become citizens of Grafton," Marvin said.

City administrator Mylo Einarson said the program would offer $10,000 deferred loans to homeowners building single-family homes, condos or townhouses, and $5,000 loans to people who move existing homes to Grafton, with forgiveness after 10 years of residency.

Mayor Fred Stark said the program puts the town on track to grow to 5,000 people by 2010.

Marvin Windows and Doors, which opened a plant in Grafton in 1997, employs about 470 people, the equivalent of one in 10 Grafton residents.

About half the Marvin employees in Grafton live outside the city, Einarson said.

The city has 1,575 residential parcels, including single-family homes and multiple-residence apartments, Einarson said.

"Most of our new construction is in the higher-end homes," he said. "We don't have much for what people would consider starter-home construction."

Another problem for Grafton is that most of the city is within a flood plain, which boosts construction costs, Einarson said. The Park River runs through town, and flood damage has led to buyouts of 21 homes.

In smaller towns like Grafton, a new home can end up worth less on the market than it cost to build it, Einarson said.

"In Grand Forks or Fargo, you can put $150,000 into a house, and it's worth more. In smaller towns, it's worth a smaller amount," he said. "The smaller the town, the bigger the gap grows."

Marvin, based in Warroad, Minn., is a privately held, family owned maker of made-to-order wood and clad wood windows and doors, with 5,500 employees in Warroad, Fargo and West Fargo, as well as in Tennessee, Oregon and Honduras.