True Built Home’s brief interview with one of the Pacific Northwest lending construction loan officers, Terry S. Pemberton of Umpqua Bank
Terry first of all, how long have you been in the lender business, and how many years total in the construction lending side of things?
Well Lewis, I’ve been in the mortgage banking industry since 1989 and I have specialized in construction lending for 20 years.
Terry, it’s good to hear that you moved from one nationally recognized bank to a more regional lender with Umpqua Bank. Why the move?
After a lot of analysis, I determined that Umpqua Bank’s construction loan products offered a better overall structure which is more beneficial to the needs of the local borrowers and builders in our area.
If a client were to ask, “which lender does TBH recommend for their construction loan?” why might we tell clients to use you?
Lewis, our construction loan products have low fees and great rates as compared to some of the other products on the market. But even more important to some borrowers is the low down payment feature if the borrower does not already own the land. If a borrower is in title on the land at the time of application, they can utilize the equity from the future finished value of the new home and land together, as if the home is already built on their lot. The benefit to the borrower is that the equity can be applied to the down payment. These unique features can be a huge help to some borrowers.
How many construction loans have you done over the course of your professional career and how does this experience help the customer?
I’ve probably closed over 1000 construction loans in the last 20 years. My experience in construction lending helps me guide the borrower through a complex loan with ease because I’ve had the opportunity of working with borrowers through so many different scenarios over the years.
What has been the average loan amount?
My construction loans have ranged from $50,000 to $2,000,000, but, on average they are typically in the $200,000 to $400,000 range.
Are construction loans more expensive than say a refi or purchase?
Yes, construction loans in general are more expensive than most other types of residential mortgages, mainly because the loan needs to include fees for the monthly inspections and draws. One advantage at Umpqua Bank is that we process and fund all draws internally through our own Custom Construction Draw Department. This means that builders will always work with an Umpqua Associate and never a 3rd party.
What documents are normally needed from the client to close on a construction loan?
Each borrower’s personal financial situation is different, but generally, financial items needed are the same as any other mortgage. As for the construction portion of the loan, I will need to document the project with a contract from the general contractor, plot plan, description of the materials, and a line item budget of all the costs. The borrower may have portions of the project that will be completed by someone other than their general contractor. This could be for things like the septic system, a new well or landscaping. If that’s the case, we’ll need documentation for those items as well. I will give the customer and the builder a complete list of the items we require early on in the process so that everyone knows what all will be needed.
How long will a construction loan take to close?
The time to complete a construction loan can vary quite a bit depending on each scenario. From the time I receive a complete credit package and a complete builder and project package we can usually close the loan within 60 days. Things that can extend that time frame are finding land on which to build, getting septic approval, getting bids for items that won’t be completed by the general contractor or changes to the project after the appraisal has been completed. When I meet with a customer I explain the details and set expectations based on their situation.
What are some typical “hiccups” to construction loans?
Obtaining the various permits required in association with the building project can create delays. Also, unexpected cost overruns can occur during construction. If a borrower started with temporary construction financing instead of a one-time close loan, they may have trouble getting approved for their permanent financing if they have had changes to their financial condition during the course of construction. Certainly other “hiccups” can occur also.
What do you think stresses out most clients during the process?
I advise all of my borrowers to try and have patience throughout the process. Many things can stress out the borrower since this may be the first time they have built a home and the long list of decisions they need to make in a short period of time will tend to add to their normal stress load. The main idea to keep in mind is the finished product will be something they can enjoy for many years to come. They need to talk about setting proper expectations up front, having solid plans and specs, keeping changes to a minimum and keeping in mind that they may run into unanticipated snags.
We know you do business with TBH competitors, but if you were to offer a compliment about True Built Home to our prospective clients, what might that be?
The fact that TBH survived and grew out of the 2008 real estate market is impressive by itself. In addition, I think TBH can include itself in a general group of on-your-lot builders who recognize the need of a middle market, custom home product, and understand how to display and deliver the concept to the marketplace.
Thank you, Terry for your time.
Loans subject to credit approval.
Terry S. Pemberton
Home Lending Officer NMLS ID 185396
Email: [email protected]
Terry can serve all of True Built Home’s locations and branches.