Construction lending is one of the highest-value origination channels available to MLOs. A construction-to-permanent loan generates two origination events or a larger single loan than a standard purchase. Builder referral relationships, unlike Realtor relationships, are less competitive because most MLOs do not understand the product well enough to serve builders effectively.
What Builders Need From a Lending Partner
- ✦Pre-qualification speed: builders need to know quickly whether a buyer can close. A 24-hour turn on a construction pre-qual letter is table stakes.
- ✦Draw management expertise: construction loans disburse in draws based on inspection milestones. The MLO and processor must understand the draw process and communicate clearly with the builder about timing.
- ✦Extended rate lock options: custom home construction takes 6 to 18 months. The builder and buyer need to know the MLO has access to extended lock products at predictable lock costs.
- ✦Fewer broken deals: a builder who has had a buyer's financing fall apart at the final inspection stage due to an MLO error will never refer again.
How to Get Builder Referrals
- ✦Identify small to mid-size custom builders in your market who close 5 to 20 homes per year and do not have a captive financing relationship
- ✦Present to them on your construction product offering and specifically address what you do differently at draw management and rate lock
- ✦Offer to co-host a buyer seminar at their model home or sales office to demonstrate the value you bring to their sales process
- ✦Ask for the first referral with zero expectations. Earn the relationship by executing flawlessly on that file.
Program Knowledge Required
- ✦One-time close vs. two-time close: the one-time close converts to permanent at completion with a single closing. Two-close requires separate closings and two rounds of costs.
- ✦FHA and VA construction loans: both agencies have construction products with specific draw and inspection requirements
- ✦Conventional construction: Fannie Mae and Freddie Mac both have construction-to-permanent programs that serve borrowers above FHA loan limits
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Aria can walk through construction loan program requirements including draw schedules, rate lock structures, and FHA construction guidelines. Ask at vicariointel.com.
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