This past fall, the devastation of hurricanes Harvey and Irma wreaked havoc on the lives of many Americans. Real estate analytics company CoreLogic estimates that Hurricane
Irma property damages exceed $42 billion and could be
as high as $65 billion.
For residential properties alone, the total damage
caused by Hurricane Irma is estimated to be between
$25 billion to $38 billion, while Harvey left an estimated $25 billion to $37 billion in residential property
damage in its wake.
The destruction caused by these hurricanes is both
financially and emotionally devastating to the people
who experienced them. For those who had uninsured
properties, the consequences are even more shattering.
Lending a hand
In these serious circumstances, the health and safety
of the survivors is, of course, the first priority. Many
survivors with severely damaged or destroyed properties also now find themselves homeless, and the long
road back to homeownership can seem daunting.
As a loan originator, this is where you have a chance to
make a difference. By working with a lender that offers
a variety of renovation and construction loan products,
you will have access to the tools necessary to assist borrowers who may be caught in a difficult situation.
Knowing how to effectively match these loan programs with the borrowers who will benefit most from
them is another story. It will take time, research and
education to ensure that you understand the renovation and construction loan processes.
Many loan originators are wary of taking on too
many renovation or construction loans simply because
these financing tools involve many moving parts, such
as contractors, consultants, appraisers, etc. As a result,
the loan process can take longer compared with a
conventional loan. When you can present yourself as
an expert on these types of loans, however, and form
strong professional connections with Realtors and
builders, you will find that your expertise is particularly helpful for many borrowers who are looking beyond
the typical purchase loan.
Constructing a specialty
For construction loans, specifically, it’s crucial to develop strong professional relationships with reputable
builders in your area. If you want to reach the borrowers who are most interested in building new homes,
this is a non-negotiable step in the process.
When approaching builders, it is essential again
to present yourself as an expert. Often, builders can
be preoccupied with the perceived challenges of the
construction loan process and are looking for an ally
who can ensure that the process will go smoothly for
their customers. Most people only build a home once
in their lifetime (if even that), so builders are not about
to risk their reputations by providing poor service or
products to these individuals.
This is where you, the mortgage originator, come in.
If you can address some of the challenges often associated with construction financing, you will be more
likely to pique the interest of builders whose clients are
n Downpayment funds. In many cases, the borrower’s funds may be tied up, waiting for their
existing-home sale to close. If you can offer a lower
downpayment option, it can help jumpstart the
n Financing approval. For a builder, nothing is
worse than working with a customer for six to eight
weeks before finding out if that person is even qualified for financing. If you can offer a shorter time
frame for verifying a borrower’s ability to finance,
you benefit the builder as well.
n Rising interest rates. One concern that potential customers may have is the risk of rising interest
rates during the construction process. If your company offers extended rate locks, this can be a huge
selling point for both borrowers and builders.
Of course, there are many additional aspects of the
construction-financing process that may be perceived
as challenges by builders and their customers. It’s your
job, as the expert, to educate them on the ways these
challenges can be overcome. When you can do this
successfully, you earn not only their respect, but also
Building renovation prowess
Renovation loans sometimes get a bad rap, because
they also involve a “niche process” that can take more
time than a conventional loan. Yet, by making yourself
an expert, you will immediately stand out from other
mortgage originators who haven’t put the time or effort into understanding renovation loans.
Renovation loans are particularly important in today’s
market and environment, and not just because natural
Kim Newby is vice president of investor relations, product
development and specialty operations at Waterstone
Mortgage Corp., where she is focused on partnering with
investors to ensure that Waterstone Mortgage’s sales team
offers the best products at competitive pricing levels.
Newby has more than 30 years of experience in the
mortgage lending and financial-services industries.
Reach her at knewby@WaterstoneMortgage.com.
by Finding Your Niche
Renovation and construction loans offer you a leg up on the competition
By Kim Newby
For more articles on renovation
and construction lending
View these articles and more at
“Renovation Lending Is on the Rise,”
“Variety Is the Spice of Success,”
“Find Your Financing Unicorn,”
Jan B. Brzeski,
Continued on Page 54 >>
“The Thrill of Renovation Loans,”