Lenders who are serious about making construction loans a vital part of their profit mix will likely have technology and risk management policies in place before they begin a full construction loan program. Every lender’s path is a little different: some may need to set up a program from scratch because they’ve never originated construction loans, while others may need to update a program already in place. In both cases, the actual demand for the construction loan product is left out of the equation.
Some lenders have a long list of construction loans to originate, but what if you don’t? Or maybe you don’t have as many as you would like?
Luckily, it may not be as difficult as you think to grow construction loan business. I have a robust history as a loan originator before entering the software business. For that reason, I am happy to share with you four ways to find construction loan business that will drive more originations.
1. Develop Relationships With Tract Home Builders And Production Builders
This first one is an obvious suggestion, so make sure you are doing it. Everyone else is building these connections, and you want to make sure you are in the running when these builders are sourcing loans. There are new applications for construction to permanent lending when it comes to production builders. There’s also thousands of custom and semi-custom home builders across the United States. Develop relationships and show their client base that you know what’s involved in construction to permanent loans and how their customers can successfully qualify. It’s a win-win-win. The builders are selling more homes, homeowners get the keys to a dream house, you make a steady commission while building a book of business.
2. Capitalize on Public Records via Government Agencies
Government agencies can tell you who’s thinking about or planning to build a home through public records. This makes any nearby planning office a wonderful place to look for potential clients. You can find out who is building in your area simply by looking at who recently applied for a permit.
Your local planning department probably has someone there whose job it is to answer any questions and provide information. Remember, everything that goes on in the planning department is public record, so it’s very easy to get copies of public records that tell you who has applied for a building permit or grading permit. More importantly, it provides an indication for who’s actually in a position to build a house. These records provide you an open door to contact the consumer directly.
3. Construction Trade Associations And Networking
There are many trade associations related to construction that loan originators can join. These organizations offer conferences and workshops that are opportune arenas to network. Attend an event to meet with contractors and builders to find out what they specialize in then let them know how you can help them reach their goals. Personally, I didn’t have as many opportunities to join trade associations early in my career. Instead, I went out and knocked on the doors of every plumber and electrician that I could find. I knew they have a pulse on the industry and know who is getting ready to bid out a project. Trade associations provide a streamlined answer to seeking out every player in your space.
4. Become A Construction Loan Specialist
When you become a specialist people seek you out. Instead of finding your own business, those needing construction loans come to you. Whether you specialize in jumbo loans, construction to perm loans, renovations, or any other specialty within the construction loan space, becoming a specialist means you’re not just an originator anymore. This status means you have a specific skill set – others will look to you as a thought leader and subject matter expert in the industry.
Early in my career I decided to become a specialist. I found this was important because it implies that I have information that is going to benefit a consumer or builder. In turn, this motivates clients and industry professionals to seek me out because I was able to provide value. I was so invested in this idea early in my career that I threw away my business cards and had brand new ones printed. My title on the new cards was Construction Specialist. This simple act of deciding to become a specialist opened up a lot of doors for me to originate more construction loans.
Through my decades-long career in construction lending, I have learned volumes worth of best practice. There are other factors I can think of to grow a construction lending program. However, these are the four I believe are the easiest to accomplish that provide tangible results. I hope these suggestions help you and your business grow successfully within the construction lending space. The process of growing a business is also a never-ending learning experience.
Let us know in the comments below any tips or tricks you have found to help build your construction loan business.