Residential Construction Lending

Community Banks are often faced with construction loan requests that are underwritten by Consumer and Commercial Lenders who apply the same underwriting standards used for retail and commercial loans to Residential Construction Loans. The problem with this approach is that Construction Lending is a highly specialized form of lending requiring a different approach. It is actually Asset-Based Lending, whereby funds are advanced based on the successful completion of various phases of the project and other requirements being met.

Many problems can occur during construction that can leave lenders highly exposed unless they are unwritten properly. Understanding the risks in this type of lending is paramount for bankers. This course is designed to provide fundamental and proven techniques to minimize these risks.

Common types of borrowers of Residential Construction Loans are:

  • Individuals constructing their single family residences (Owner/Occupant)
  • Developers who transform raw land into improved property suitable for construction and
  • Builders of 1-4 family residences.

We will examine the characteristics and risks inherent with these borrowers; how to underwrite them and the real estate project under construction. Our primary focus will be on financing the construction of single-family residential housing.

Covered Topics

  • Prerequisites for Successful Construction Lending
  • Analyzing and Underwriting the Owner/Occupant
  • Analyzing and Underwriting the Builder/Developer
  • Overview of the Actual Development and Building of a Residential Unit
  • Structuring the Construction Loan
  • Managing Construction Loan Advances
  • Financing Land Acquisition and Land Development
  • Construction Lending Documentation
  • Problem Areas in Construction Lending

Who Should Attend?

Loan Officers, Senior Credit Officers, Senior Loan Officers, Loan Administrators, Loan Review Officers, Compliance Officers, Branch Managers, Credit Analysts and Underwriters


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