Construction Loans: Building on the Lakeshore

A construction-to-permanent loan, sometimes called a single-close or one-time-close loan, is the cleanest way to finance a new build in West Michigan. It rolls your construction financing and your permanent mortgage into one loan with one closing and one set of closing costs. During construction you typically make interest-only payments on the money that has actually been drawn, then the loan automatically converts to a standard 15- or 30-year mortgage once the home is finished. The alternative is a two-close structure, where you take a short-term construction loan and then refinance into a separate mortgage, which means two closings and two sets of fees. For most of the buyers I work with building near Grand Haven, Holland, or South Haven, the single-close route is simpler and less expensive. I'll connect you with local lenders who handle both.

Instead of handing your builder the full loan amount up front, the lender releases money in stages called draws, tied to construction milestones like the foundation, framing, mechanicals, drywall, and final completion. Before each draw is released, the lender usually sends an inspector to verify that the work was actually done. A common setup is a handful of draws, with each one covering roughly twenty percent of the project, though larger custom builds can have more. You only pay interest on the money that has been drawn so far, not the full loan, which keeps your payments manageable during the build. I help my clients understand the draw schedule before signing so there are no surprises about timing, and so your builder's payment expectations line up with how the lender actually funds the project.

Construction loans usually ask for more cash than a standard purchase. Conventional construction financing often expects around twenty percent down, though some West Michigan lenders go lower for qualified borrowers; a local credit union here, for example, advertises programs up to ninety-five percent of value, meaning as little as five percent down. Lenders also commonly look for a credit score around 680 or higher and a debt-to-income ratio at or below forty-five percent. On top of the down payment, most lenders want a contingency reserve, often ten to fifteen percent of the build budget, set aside for the cost overruns that always seem to happen with permits, weather, and material prices. The good news is you generally don't pay interest on contingency funds unless they're actually drawn. Exact numbers vary by lender, so let's get you a live quote before you plan your budget.

A regular mortgage is underwritten against a house that already exists, so the lender can see and value it today. With a construction loan, the lender is financing something that doesn't exist yet, so there are extra layers of review to protect everyone. You'll submit detailed plans, specifications, a line-item budget, and a construction timeline. The lender vets your builder, orders an appraisal based on those plans, sets up a draw schedule, and arranges inspections throughout the build. There's more paperwork and more moving parts than a typical closing, which is exactly why I pair my building clients with lenders who do construction lending regularly rather than occasionally. The extra steps feel like a lot, but each one exists to keep your project funded and on track.

Yes, and this catches a lot of first-time builders off guard. The lender doesn't just approve you, they approve your builder too. You'll typically need to provide your builder's license, credentials, and sometimes a resume or references, along with the construction plans and project timeline. The lender wants confidence that whoever is building your home can finish it on budget and on schedule, because the bank is releasing money in stages against that builder's work. If you already have a builder in mind for your lakeshore home, tell me early so we can confirm they'll clear the lender's approval before you're deep into the process. If you're still choosing, I can point you toward reputable West Michigan builders who are familiar with how construction draws work.

This is one of the most important differences with a construction loan. Because there's no finished home to walk through, the appraiser estimates what your home will be worth once it's complete, based on your plans, specifications, finishes, and comparable properties in the area. That projected completed value is what the lender uses to size your loan. On the West Michigan lakeshore this matters because lot premiums, water proximity, and high-end finishes can make a big difference in value, and the appraisal has to support what you're spending. As a licensed appraiser myself, I can help you think through how your plans and selections are likely to appraise before you commit, so you're not blindsided by a value that comes in lower than your build budget.

In most cases, yes, and it's one of the real advantages of a single-close construction-to-permanent loan. Many lenders let you lock your permanent rate at the time of application, often for up to about twelve months, so even if rates rise while your home is going up, your locked rate holds. That's valuable peace of mind on a build that can take the better part of a year. I won't quote you a specific rate here, because mortgage rates move every day and anything I print would be outdated fast. What I will tell you is to ask each lender exactly how long their construction rate lock lasts, whether there's a fee, and what happens if the build runs long. Then get a live quote so you're comparing real numbers, not estimates.

Custom lakeshore homes can get expensive quickly, so this comes up often. For 2026, the conforming loan limit for a one-unit home in our West Michigan counties is $832,750, which is the baseline that applies across most of the country. As long as your loan stays at or below that figure, you're in conforming territory with the widest set of program options. Go above it and you're into a jumbo loan, which typically means stricter credit, income, and reserve requirements, and often a larger down payment. If your build budget is pushing toward that line, it's worth planning early, because jumbo construction lenders are a smaller pool. I'll help you understand where your project lands and connect you with lenders who handle higher loan amounts on the lakeshore.

Talk to a construction-savvy lender before you fall in love with a lot or a floor plan. Construction financing has more requirements than a standard mortgage, so getting pre-approved first tells you your real budget, including the down payment and reserves you'll need, and exposes any credit or documentation issues while there's time to fix them. From there we'll line up the pieces in the right order: confirm your builder can clear lender approval, pin down a realistic build budget, and make sure the plans will appraise for what you're spending. I work with lenders across Grand Haven, Holland, Muskegon, and South Haven who do construction loans regularly, and as a licensed appraiser I can sanity-check your numbers along the way. Reach out and we'll map the whole path before you break ground.