How Construction Loans Work for Lakefront Lots

Dreaming of designing a custom home that steps right down to Norris Lake? Building on a lakefront lot in La Follette is exciting, but the financing and permitting work differently than a typical neighborhood build. You want clear steps, realistic timelines, and a loan that fits your plan. This guide breaks down how construction loans work for lakefront lots, what lenders focus on in Campbell County, and how to keep your project moving. Let’s dive in.

What a construction loan covers

A construction loan is short term financing that funds your build in stages called draws. You usually pay interest only on the money disbursed during construction. Many buyers choose a construction-to-permanent loan that converts to a standard mortgage after the home is finished, instead of refinancing later. Investopedia explains the basics and lender guides outline typical draw schedules.

Lender requirements for lakefront builds

Builder and plans

Lenders look for a licensed, approved builder and detailed plans, specs, and a realistic schedule. You will submit a full budget with a contingency and an interest reserve. Loans are underwritten to the projected completed value, sometimes called appraised “as completed.” Learn more about lender expectations.

Equity and down payment

Expect meaningful equity. A common guideline is about 20% to 25% of the completed value, though programs vary by lender and borrower profile. If you already own the lot, its equity can often count toward your down payment. See typical ranges.

Appraisal, draws, and inspections

Lenders size the loan using an appraisal of the finished home. Funds are released in stages tied to milestones like foundation, framing, and final. Each draw usually requires an inspection or third-party verification, and lenders may hold a small retainage until lien periods pass. Here is a helpful overview of draws and timelines.

Lakefront issues lenders check

TVA shoreline permits on Norris Lake

Norris Lake is a TVA reservoir. Docks, boathouses, shoreline stabilization, and similar work usually need a TVA Section 26a permit. Lenders and appraisers watch for permit status because it can affect value, marketability, and schedule. Always request existing permits and confirm that structures match approved plans. Start with TVA’s Section 26a rules and the shoreline permits hub.

Septic and utilities

If your site is not on public sewer, Tennessee requires a septic approval before the local building permit. Many lake lots need a high-intensity soil map or engineered system because of slope, soils, or setback limits near the water. Lenders expect a permitted wastewater solution and potable water access in the plan. See the state’s septic program at TDEC’s SSDS page and review lender expectations on utility readiness and builder contracts.

Flood zones and insurance

Check your parcel on the FEMA Flood Map Service Center. If your structure is in a Special Flood Hazard Area and your loan is federally connected, flood insurance is required. Elevation certificates and mitigation can influence premiums and underwriting. Start with the FEMA MSC.

Title, access, and dock rights

Waterfront value often depends on documented rights. Ask for recorded easements, HOA covenants, and any TVA permit on file. Missing or unclear rights can affect appraisals and resale. TVA outlines key checks when buying or selling waterfront property.

Local permitting in Campbell County

In Campbell County, the building permit process typically requires septic approval before a building permit is issued. Confirm whether your lot is inside La Follette city limits or in the county’s jurisdiction, then follow the correct office’s steps. The County Clerk’s page is the best starting point for building permit questions. Visit the Campbell County Clerk.

Quick permitting checklist

• Verify jurisdiction: La Follette city or unincorporated Campbell County.
• Start TDEC septic evaluation and permit if no public sewer is available.
• Contact TVA for shoreline jurisdiction and any existing Section 26a permit.
• Confirm flood zone and consider an elevation certificate if near an SFHA.
• Assemble plans, specs, builder contract, and a realistic budget with contingency.

Costs to budget for

Lakefront builds often carry extra site costs. Plan for:

• Shoreline stabilization and erosion control, including engineering and permits. TVA rules provide context.
• Foundations for steep banks and long lakefront walkways or stairs.
• Septic systems that may require engineered solutions near the shoreline. See TDEC septic guidance.
• Utility extensions for water and power, plus site grading and driveway work.
• Dock construction and TVA permit fees if a dock is allowed. Review TVA permitting basics.
• Flood insurance if the home will be in an SFHA. Confirm on FEMA MSC.

Timeline and negotiation tips

Construction loans often anticipate a 6 to 12 month build, but shoreline permits and septic approvals can extend timelines. Plan for that on both the loan and contractor side.

• Ask sellers for TVA permit copies, septic records, surveys, and HOA documents early.
• Include contingencies tied to TDEC septic approval and any TVA Section 26a permit.
• Choose a fixed-price or guaranteed maximum builder contract when possible.
• Keep a solid contingency in your budget for site surprises. BuildingAdvisor explains lender caution on site risk.

Ready to walk lake lots, refine your plan, and connect with local pros who build on Norris Lake every day? Lean on the builder-to-broker heritage and local market reach of Alco Builders and Realty to move forward with confidence.

FAQs

How do construction-to-permanent loans work?

• You close once, pay interest only during construction, then the loan converts to a long-term mortgage at completion. See Investopedia’s overview and a lender guide to draws.

What down payment do I need for a lakefront build in La Follette?

• Many programs target about 20% to 25% of the completed value, and lot equity can often count toward that; exact requirements vary by lender and program. Learn more.

Who issues permits for docks on Norris Lake?

• TVA manages shoreline uses and requires a Section 26a permit for most docks, boathouses, and stabilization work. Start with TVA’s Section 26a rules.

Do I need septic approval before a building permit in Campbell County?

• Yes in most cases when no public sewer is available; Campbell County requires septic approval before issuing a building permit. Check the County Clerk’s page and TDEC septic guidance.

Will I need flood insurance for a Norris Lake home?

• If your structure is in a FEMA Special Flood Hazard Area and the loan is federally connected, lenders will require flood insurance; verify your zone on the FEMA MSC.