Mortgage Pro News

Several years ago I took a look at the mortgage market and my role in it, and realized that I needed to focus on a niche. It was the best decision I ever made. The niche I chose was Construction to Permanent financing.

Why CTP? Well, there are several reasons, but here are my top ten. Consider this:

Less than one in ten loan officers ever even try to do a construction loan. And even less - far less - have a clue how to do them correctly or profitably. This equals huge opportunity for anyone who is willing to learn this niche.
New Home Construction accounts for 6% of the U.S. Gross National Product. Think about that: year in and year out, new home building will never go away. It can't. It is too important to our economy. New construction is not nearly as "rate sensitive" as you may think. In this respect, it is unlike so many other aspects of the mortgage world. There is opportunity in any market.
The market is huge, and the competition is nonexistent. Consider this: last year, approximately $110 Billion Dollars of FHA loans were originated. Over $275 Billion worth of new homes were financed. How many LO's in your town do you know who do FHA loans? How many do you know that do Construction Loans? Do the math. The market for Construction Loans is 2.5 Times larger than for FHA and they are done by a fraction of the competition!
In 2005, after factoring out the 385,000 new homes built by the 200 largest builders in the US, over 715,000 new homes were built by the next 10,000 builders - this is where the money is: builders who build 30-100 homes per year. These builders are not like their bigger counterparts. They do not typically have an in-house mortgage company; and many of them do not have their own lines of credit. They actually need YOU! You can solve their problems, reduce their stress and put more cash in their pockets. This is how you build both relationships and your wealth.
Even with the Headlines screaming that "housing starts are down", the real numbers are down a meaningless amount - only down 1-2% year over year. So that means in 2006, the projected number will be 700,700 homes built by those 10,000 builders- still more than enough to go around, I would say! I closed 91 of them in the last twelve months and earned $714,416.40 in fees on those loans (see my average fees per loan below). That leaves 700,609 loans nationwide for you. Do you want a piece of that pie? New homes have always been built and always will be - when rates were 15% and when they were 5% - it just does not matter if you are smart and understand how to market.
The median price nationally for new homes is 19% higher than existing homes. Higher prices = higher commissions. (Combine this with my next point)
Being positioned as an expert and not having a thousand other LO's competing with you allows you to charge higher fees per loan without being "shopped." My average fee per loan is $7,850.73, and that is only making just over 2.2 points per loan (which could easily be increased). How many loans at that average do you need per month to be happy?
Loyalty from builders = repeat business. Once you develop a relationship, it is your's until you screw it up. You also have the opportunity to build loyalty with Realtors and sale’s agents. Again, being the expert in a niche makes this happen.
Ability to market to both builders and to end-customers. CTP loans give you two (really three, see below) opportunities to find deals. You can “hit ‘em from both ends.”
Truth is, I actually can't stand most real estate agents. But, I will say this: once you save a deal for one of them, they will come back to you over and over (whether you like it or not). As someone who has expertise that few in your area have, you will be sought out by the very same people you once begged from.

There you have it: Ten reasons why construction lending is my favorite niche. And, ten reasons why it can be a great niche for you as well. The beauty of this niche is that it will never go away, regardless of market. In fact, in today’s market environment, there are multitudes of ways to reach and develop relationships with builders. This will put money in your pocket now and for years to come.