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What experience does your construction loan officer have and does it matter?

When it comes to money it's amazing how fast any loan officer becomes an instant expert at construction loans. You must keep in mind that all loan officers are salespeople. Yes, I know they have fancy titles like loan officer or vice president but the title is nothing but a fancy name for salesperson. It doesn't matter if they work for a bank and have a nice office or a broker with their own office they are still salespeople.

Salespeople usually have one main goal in mind when helping you with your loan request and that is their commission. By the way, the fancy name for commission in the loan business is called a loan fee, origination fee, broker fee, points or yield spread premium (YSP). But no matter what you call it it's still a commission.

Whether you go directly to a bank or utilize the services of a broker the name of the commission is usually called one of the above. By the way the average loan fee all loan officers earn whether you go directly to a bank or a broker is 1 percentage point of the loan amount.

Now don't get me wrong, there are a lot of good honest sales people (loan officers) that work very hard at providing you the best service and rates. What's important is distinguishing the good from the bad.

The following questions allow you to quickly find out if your loan officer is experienced at construction loans.

1. How long have you been doing construction loans? 5 years or more is best.
2. What is better? The voucher or draw disbursement system and why? Draw is now the most popular because the customer has the control of the money and the builder can take as many draws as possible assuming the particular line item on the cost breakdown is completed.
3. Does the bank require a contingency and an interest reserve account? This is a choice but most banks automatically add both to the loan amount.
4. How many constructions loan have they done? An easy way to determine if they are specialists or a jack of all trades is by taking a look at their web site. If you see that there main focus is everything then they are not a construction loan specialist.

If the loan officer (sales person) can answer these questions with no problem then they have passed a pretty good basic litmus test.

But the best and most important indicator is how helpful is the loan officer? Is the loan officer more interested in helping you obtain the best construction loan? Or is the loan officer more interested in helping you obtain the most profitable loan for their sake.

If you really want to throw a curve at them, ask the loan officer if they have ever built a home themselves and what type of construction loan did they get.

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