How do I finance a custom home build in Seattle or on the Eastside?

When owners in Seattle or on the Eastside borrow to build a custom home, the usual structure is a construction-to-permanent loan. The lender pays the builder in stages as the house goes up, you pay interest on what has been drawn, and when the house is finished the loan converts to a normal long-term mortgage. The part that catches owners out is what has to exist before that loan will close: a finished design, a priced budget from a builder, a site plan and a specification the appraiser can value. All of that comes out of the design and permit phase, and you pay for it first.

I am an architect, not a lender. This page is general education, not financial advice. Loan terms, down payments and rates come from lenders; get them in writing from more than one. What I can explain is how the design side and the loan fit together.

The ways to finance a custom home

The loan itself is usually one of three structures, often combined with land equity or cash.

Construction-to-permanent, single close

One application, one closing, one set of loan documents. During construction you make interest-only payments on the money drawn so far, not on the whole loan. When the house is complete, the loan converts to its permanent terms without a second closing. The advantage is certainty: permanent terms are settled before anything is built. The cost is giving up the chance to shop the permanent loan later.

Two-time close

A construction loan closes first, then a separate permanent mortgage closes when the house is finished, with its own documents and its own underwriting. You qualify twice. The trade is flexibility: if rates or your finances look better at completion, you can take advantage of it. If they look worse, you carry that risk.

Construction-only loan

A short-term loan that funds the build and is repaid at the end, from a new mortgage, the sale of your current home, or other assets. It is the most flexible structure and the most exposed to what happens during the 12 to 18 months of construction.

Land equity, cash, or a mix

If you own the lot, its value can count toward your side of the deal; that has its own section below. Some owners pay for design and permitting in cash and finance only construction. Others fund everything from cash or the sale of a current home, which removes the lender but not the need for a priced, documented scope.

	Construction-to-permanent, single close	Two-time close	Construction-only loan
Closings	One	Two, with two sets of loan documents	One for construction. The long-term loan, if any, is a separate decision later
Permanent terms set	Before you break ground	At completion	At completion, by whoever you choose, or not at all if you pay it off
Qualify again at the end	Usually not, though the lender may recheck credit or value before conversion	Yes	Yes, if you take a new mortgage
What you trade	Less flexibility later for certainty now	A second closing and fresh underwriting for the chance of better terms	The most flexibility, and the most exposure to your circumstances and the market at completion
Often suits	Owners who want one process and a known permanent loan	Owners who expect their finances or the market to look better at completion	Owners planning to repay from a sale, cash, or other assets

Rates, fees and your cash in vary by lender and loan size.

What changes at $2M to $6M

For 2026, the Federal Housing Finance Agency set the one-unit conforming loan limit for King, Pierce and Snohomish counties at $1,063,750 (the national ceiling for the highest-cost areas is $1,249,125). That limit governs which mortgages Fannie Mae and Freddie Mac will acquire. On a custom home in the $2M to $6M range, the loan amount is usually above it, which makes it a jumbo loan. It resets every year; confirm it with your lender.

Jumbo lenders set their own rules on how much you put in, what reserves you hold, which builders they accept and how they run draws. I would not rely on any down payment figure from a general article. Ask two or three lenders for construction terms at your loan size, in writing.

What the lender needs from the design side

A purchase mortgage lends against a house that exists. A construction loan lends against a set of documents. One Washington lender’s published guide to custom construction lists what it requires before it will even order the appraisal:

• Building plans, including the foundation plan, floor plans and elevations.
• A site plan showing lot dimensions, setbacks, easements, adjoining roads, and where the house and garage sit.
• A description of materials and specifications.
• A fixed cost breakdown or budget from the builder.
• A fixed-price construction contract that matches the cost breakdown exactly, with every document signed by owner and builder.
• An acknowledgment of any costs you have already paid, with receipts.

On top of that, the lender reviews the builder: license, insurance and a questionnaire on experience and finances. That same guide states plainly that you must use an accepted builder and cannot build the house yourself. You will also need the building permit and course of construction insurance before work starts.

Look at that list from the design side. Plans, site plan and specifications are architectural documents. The fixed budget and contract only exist once a builder has priced a drawing set complete enough to price honestly. You cannot get a genuine fixed number off a sketch, which is the whole argument of how to read a builder’s estimate.

The appraisal is of a house on paper

The lender orders an appraisal of the home as if it were already complete, based on the plans, specifications and cost breakdown. Fannie Mae calls this the as-completed appraised value, and on a purchase it measures the loan against the lesser of that value and the total cost of the lot and construction. Lenders making jumbo loans are not bound by that rule, but the logic is common: the loan follows the lower number.

So a vague specification gives the appraiser less to value. A complete one is the evidence that the finished house is worth what it will cost.

Why design fees are paid before the loan closes

The order of events is the part that surprises people. The loan cannot close until the documents above exist, and the documents only exist once design is well advanced and a builder has priced the drawings. So the early phases come first, and they are usually paid out of your own funds:

1. Feasibility and design. If the architect prices by percentage, fees are typically planned at 8% to 15% of construction cost across all phases (Piper Cole quotes a fixed fee), set out in the architect fee guide. The design phases come before any construction loan.
2. Engineering, surveys and permit fees. Also before closing, in most cases.
3. Permitting, which typically takes 6 to 10 months for a new house in Seattle and about 2 to 3 months for a remodel.
4. Bidding and the builder’s fixed budget.
5. Appraisal, underwriting and closing. Then the first draw, and construction of 12 to 18 months.

With phases overlapping, a custom home typically takes 18 to 30 months from design start to occupancy. The custom home timeline breaks that down phase by phase.

Some lenders do recognize those early costs. The guide above asks for receipts for anything already paid, and at least one regional lender’s own page describes a first draw for plans, permits and initial costs shortly after closing. Whether your money comes back as a reimbursement, a credit toward your cash in, or not at all is a lender-by-lender question. Ask before you pay the first design invoice, and keep every receipt.

The planning point: you need liquid funds for the design and permit phase, separate from the money you will bring to closing. The guide to budgeting for an architect shows how those fees fall across the phases.

How draws work, and why the schedule matters

The lender does not hand the builder the loan. It releases money in stages, called draws. One lender’s published borrower guide sets out the cycle: the builder submits a draw request, the lender sends an inspector, you and the lender review and approve, and the funds are released. Inspections are what release funds, based on the work in place.

• The draw schedule should match how the house is actually built. Otherwise the builder ends up short of money or paid ahead of the work.
• You pay interest only on what has been drawn. A draw released early costs you interest earlier and leaves less money for the end of the job, where finishes live.
• Lien releases matter. Under RCW 60.04.021, anyone furnishing labor, professional services, materials or equipment to improve your property can have a lien on it. Fannie Mae requires all construction liens to be satisfied before it will take a converted loan, which is why lien releases from subcontractors and suppliers are worth collecting as draws go out.

The lender’s inspector protects the lender, confirming that work worth roughly the amount requested is in place. The inspector is generally not there to check whether the specified window went in or a substitution was quietly made.

Contingency, cost overruns and who carries them

The loan amount is fixed at closing against the lower of cost and appraised value. If the project costs more than the loan, the lender does not usually cover the difference. You do. The same lender guide says it directly: while the builder’s job is to help, it is ultimately the borrower’s responsibility to finish on time and on budget.

Overruns usually come from low allowances, site conditions found in excavation, owner changes, and gaps between the drawings and what was priced. Each is partly a design question.

• Carry a contingency you control. Ask the lender whether it requires a contingency line inside the loan budget and how that line is released. Then hold your own reserve outside the loan as well.
• Know which contract you are signing. Under a fixed price the builder carries overruns on the defined scope. Under cost-plus you carry them. A guaranteed maximum price sits between. The trade-offs are laid out in the builder’s estimate guide linked above.
• Test allowances before closing. An allowance that is half of what you will actually choose becomes an overrun the day you choose it.
• Price change orders before you approve them, with cost and schedule impact in writing.

An appraisal that comes in below cost is a related risk. Because the loan follows the lower number, a shortfall in value becomes cash you bring to closing. My planning range for new custom home construction in 2026 is $400 to $900 per square foot, and a 2,500 sq ft custom home plans at $1.2M to $2.5M all in, so a gap on a larger waterfront house can be meaningful. The full cost picture is in what it costs to build a house in Seattle.

How construction administration protects the draw process

Construction administration is the phase where the architect stays involved after the permit, on your side of the table. Its most practical job, from a financing point of view, is the payment application.

A common way to run this is AIA Document G702: the builder applies for payment on the form, with a continuation sheet listing each line of work. The architect reviews it against what is actually built and certifies the amount due. The architect can certify a different amount from the one requested when the work does not support it.

That certification answers a different question from the lender’s inspection. The inspector asks whether enough is in place to justify the money. I ask whether what is in place is what you are paying for: the specified materials, the approved details, the change orders you actually signed. When they do not match, you find out before the money has left.

I also review change orders before you sign them and hold the punch list at the end, which is when the final draw and any retained funds are released. The detail of the role is in what construction administration involves.

Using land you already own

If you own the lot, whether bought outright or as a teardown you plan to replace, it is part of the project’s value. In Fannie Mae’s rules, when the borrower already owns the lot, the loan is measured against the as-completed value of the lot and the finished house together. That is why owners who hold land free and clear often need to bring less cash to closing. Whether your lender counts the land at appraised value, at what you paid, or with other conditions is a question to ask directly.

Timing can matter. For a two-time close done as a cash-out refinance, Fannie Mae requires the borrower to have held title to the lot for at least six months before the permanent loan closes. Jumbo lenders set their own rules, so ask.

If you are still buying land, some lenders offer a separate lot loan that the construction loan later pays off, which gives you time to design and permit first.

What to have ready before you apply

Talk to lenders early, while the design is forming. Have these in hand before you formally apply:

1. Proof of funds for the design and permit phase, separate from your closing funds.
2. A permit-ready drawing set: plans, elevations and a site plan with setbacks and easements.
3. A written specification complete enough for a builder to price and an appraiser to value.
4. A builder selected by competitive bid, with a fixed budget that matches the drawings.
5. A draw schedule agreed with the builder that follows the real sequence of construction.
6. An allowance schedule you have tested against what you would actually choose.
7. A contingency reserve you control, and receipts for everything already paid.

Piper Cole designs and administers construction. It does not build. The drawing set, specification and bid produce most of the project documents a lender asks for, and construction administration follows the money once draws begin.

Questions

How do I finance a custom home build?

Owners who borrow usually use a construction-to-permanent loan: the lender pays the builder in draws during construction, you pay interest only on what has been drawn, and the loan converts to a long-term mortgage when the house is finished. Other options are a two-time close, a construction-only loan repaid from a sale or other assets, cash, or a mix. In every case the lender needs plans, a site plan, specifications and a builder’s fixed budget before it will close, so design and permitting come first. This is general education, not financial advice; get terms from lenders.

What is a construction to permanent loan?

A construction-to-permanent loan is a single loan that finances construction and then converts to a permanent mortgage when the house is complete. In the single-close version there is one application, one closing and one set of documents, and the permanent terms are set before construction starts. During construction the lender releases money in draws as work is inspected, and you pay interest on the amount drawn.

Is it hard to get a construction to permanent loan?

It asks more of you than a purchase mortgage. The lender underwrites you, the builder and the project, and it appraises a house that does not yet exist from the plans, specifications and cost breakdown. The borrower side is familiar mortgage underwriting. The project side depends on documents that only exist once design is well advanced and a builder has priced it, which is why a complete drawing set and specification make the process easier.

How much is the down payment on a construction loan?

It is set by each lender and by loan size, so get it in writing from more than one lender. Structurally, your cash in is the gap between the total project cost and what the lender will lend, which is capped against the lower of cost and the as-completed appraised value. For a custom home in the $2M to $6M range the loan is usually above King County’s 2026 conforming limit of $1,063,750, which makes it a jumbo loan with terms set by the lender.

What is the construction loan down payment if I own the land?

Land you own is part of the project’s value, and many lenders count it toward your side of the deal, which often means less cash at closing. Under Fannie Mae’s rules, when the borrower already owns the lot, the loan is measured against the as-completed value of the lot and the finished house together. Jumbo lenders set their own rules, including how they value the land and how long you must have owned it, so ask each lender directly.

Why do I pay the architect before the construction loan closes?

Because the loan cannot close until the design exists. A construction lender needs plans, a site plan, specifications and a builder’s fixed budget and contract before it orders the appraisal, and those only exist once design is well advanced. Design, engineering and permitting are usually paid from your own funds first. Some lenders ask for receipts for costs already paid, and at least one makes a first draw for plans, permits and initial costs shortly after closing. Whether that money comes back to you is a lender-by-lender question, so ask before the first invoice.

Who pays if a custom home goes over budget during construction?

Usually you do. The loan amount is fixed at closing, and at least one lender’s published guide states that finishing on time and on budget is ultimately the borrower’s responsibility. Under a fixed-price contract the builder carries overruns on the defined scope, but owner changes, allowance overages and unforeseen site conditions typically land with the owner. Carry a contingency you control, test allowances before closing, and price every change order before approving it.

How do construction loan draws work?

The builder requests a draw, the lender sends an inspector to confirm the work is in place, you and the lender approve, and funds are released. Draws are tied to progress, and you pay interest only on what has been drawn. Because anyone who furnishes labor, professional services or materials can have a lien on the property in Washington, collect lien releases from subcontractors and suppliers as draws go out.

Does Piper Cole Architects build custom homes or arrange financing?

No. Piper Cole designs and administers construction. It does not build, lend or arrange loans. The firm produces the drawings and specifications a lender and appraiser rely on, runs the bid so the builder’s budget matches the drawings, and during construction reviews payment applications and change orders on the owner’s behalf.