Simple Construction Lending Training

Getting started in construction lending is simple with these valuable, yet easy to digest, tips. Consider them a primer in construction lending training.

New construction properties are gaining significant attention and traction for consumers. Because of this, Construction-to-Permanent (CTP) products are growing substantially amongst competitive lenders wanting to stay relevant in the market. Construction lending training is becoming increasingly imperative for lenders wishing to begin CTP lending. But what’s the best way to begin?

Lenders should start their CTP program with a solid foundation of strategies, tools, and resources to help achieve their goals successfully.

From a recent webinar, Standing Up Construction-To-Permanent Lending Programs, our subject matter expert shared 10 points that are imperative for any CTP program. These tips reflect what any sound construction program should have ingrained in their policies and procedures.

1. Establish and adhere to a Construction Risk Management Policy

The lender will maintain a management-approved “Construction Risk Management Policy Statement” to define the Lender’s risk profile and to avoid layering risk components and to ensure compliance with the secondary mortgage market – if the converted loan is intended for sale.

2.Ensure construction workmanship conforms to the contract

The lender will ensure that construction workmanship meets acceptable industry standards and conforms to the approved building plans and specifications, that the collateral appraisal and the construction contract are based on.

3. Keep the project on schedule

The lender will ensure that construction remains on schedule for completion relative to the construction term and conversion date of the loan.

4. Maintain a balanced construction loan at all times

The lender will ensure that the construction loan remains “in balance” at all times, that the undisbursed funds remains adequate to complete the improvements, and draw disbursements are released only for work completed.

5. Verify contractors are acceptable to complete the project

The lender will ensure that the borrower’s general contractor/builder is acceptable with the proper license, insurance, financial capacity, and adequate experience to complete the project.

6. Uphold continued priority of the lien

The lender will, at all times, ensure the continued priority of the lien of the construction loan Security Instrument.

7. Comply with your Construction Loan Agreement

The lender will, at all times, ensure continued compliance with the Construction Loan Agreement and to ensure prompt cure of defaults and if necessary commence enforcement of the Security Instrument.

8. Ensure regulatory compliance with entitlements, zoning, and permits

The Lender will, at all times, ensure regulatory compliance with the construction entitlements, zoning, and building permits.

9. Provide the borrower an exit strategy from construction

The lender will ensure that the borrower always has an exit strategy from construction, either with a loan conversion, modification, or second closing.

10. Always consider the borrower’s best interests

The lender will ensure that the borrowers best interests are always considered in the administration of the loan.


We call these the 10 covenants of CTP lending and have provided a printable PDF for you to reference. Enjoy this free download here:

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