Residential Construction Lending

Residential construction lending continues to expand slowly, along with the economy, with remodeling maintaining a large share of projects. This program provides an overview of the major issues involved in consumer or residential construction lending, primarily to individuals having a home built or remodeled.

Topics

What is construction risk and how is it mitigated?
What is the type of project?
- Full construction vs. repair/remodel
- Owner as borrower, hires a builder
- Builder/speculative
What additional due diligence is needed, beyond a conventional mortgage application and underwriting?
- Construction contract and cost estimate issues (Description of Materials form)
- Contractor credentials and qualifications
- Plans and drawings
- Survey
- Title insurance
- Appraisal issues
Loan pricing and structuring
- Typical interest rate and fees
- Construction loan agreements
Issues with draws and inspections, including cost over-runs and lien priority
How is the construction loan going to end (get repaid)?