Residential Construction Lending

Construction Lending in any form is a highly specialized form of lending requiring different approaches than those utilized in non-construction transactions. Some of those differences include an emphasis of market and technical risks and the functionality of the underlying structure being constructed to produce a sale or income. These factors are in addition to the credit risk inherent in all loans. Construction Lending is actually Asset-Based Lending whereby funds are advanced based upon 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. Therefore 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.

The common borrowers of Residential Construction Loans are: Individuals constructing their single family residences (Owner/Occupant); and Developers who transform raw land into improved property suitable for constructing homes 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.

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

The primary focus of the course will be on financing the construction of single-family residential housing.

Who Should Attend?

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