Tips on originating successful construction loans
Due to the high costs of new construction, construction loans stand at the heart of the entire construction industry. Without builders having readily available access to financial resources, housing and commercial building projects would never see the light of day.
As a lender, it’s essential that you include construction lending as part of your lending menu. There’s simply too much money out there to be made to forgo such an opportunity. To help promote the origination of successful construction loans, here are five tips to help guide your way.
1. Make Loan Features Clear
If a prospective borrower doesn’t understand the nuances of a loan offer, it’s likely they will be ill-prepared to provide the proper documentation. That could result in too many unqualified borrowers submitting an application, wasting the time of your loan processors. To avoid wasting time, you need to make sure loan features and nuances are very clear to the borrowing public.
2. Clarify Loan Fee Requirements
Construction loans carry a wide range of complicated processing fees. It’s only fair that you make full disclosures about all borrowing costs. Your prospective borrowers will feel better about signing on the bottom line if they know the true costs associated with doing so.
3. Transparency
Experienced builders have borrowed in the past. They know what questions they need to ask of lenders. If you remain fully transparent about every aspect of the borrowing process, informed borrowers will feel good about securing a loan with you.
4. Focus on the Loan Package
If you want the confidence of your customers, you need to show your worth as a lending professional. You can help do that by reviewing the loan package prior to submission to the prospective borrower to ensure it’s complete and organized.
5. Set Clear Expectations With Prospective Borrowers
The construction lending process is very complicated. As such, it takes more time and effort than other types of loans. Prospective borrowers need to know this upfront to prevent them from becoming impatient and frustrated.
Have questions? Speak to an expert for more information.