The brokers who master construction finance now are building a skill set their competitors cannot quickly replicate
Every market cycle reveals who has built a real business and who has been riding conditions. When single-family purchase and refinance volume fell off as rates normalized, a lot of originators waited for the market to come back to them. At Insignia Mortgage, we went looking for the market. Construction lending is where we found it.
I have been originating complex, non-agency loans in California for over two decades. In that time, I have watched construction financing shift from a niche that banks once owned to a space that private capital now dominates and that most brokers still avoid entirely. That avoidance is a mistake, and increasingly, it is a competitive one.
The bank retreat left a real gap
Banks have largely exited construction lending for consumers. I want to be precise about that distinction, because it matters: professional builders and developers have no shortage of capital options. Private lenders are actively competing for that business, and leverage is available. But an individual who wants to tear down an older property and build a home for personal use a high-net-worth client, a self-employed professional often cannot find a single institutional lender willing to provide reasonable leverage. The consumer is underserved in a way that most people in this industry do not fully appreciate.
There are only a handful of lenders I am aware of nationally who are doing consumer construction loans at any meaningful scale. I have been saying for years that the non-QM space needs to address this. A self-employed borrower with strong cash flow and a well-structured project should not be locked out of construction financing simply because their tax returns do not reflect their actual income. I was encouraged recently to find a bank offering bank statement construction loans essentially applying non-QM underwriting logic to the construction product. That kind of innovation could open significant possibilities for consumers who want to renovate substantially or build new ones. It is a long time coming.
Some larger regional banks on the West Coast are also starting to re-enter the construction of lending space. I am watching that closely. But even with those signals, most major lenders are not offering consumer construction products. The gap remains, and the brokers who position themselves to serve that demand now will have a durable advantage.
What it actually takes to do this well
I will not pretend that construction lending is simple to learn. It is not. And that is exactly why it is worth learning.
To work on a construction deal competently whether for a consumer client or a professional developer you have to underwrite two things simultaneously: the borrower and the project. The borrower side is familiar with territory: credit, financials, income documentation. But the project requires a different skill set entirely. You need to review the general contractor and architect agreements, assess the approved plans and permits, work through a line-item budget, validate that budget against reasonable cost expectations, and develop your own view of what the completed property will be worth before the appraiser ever sets foot on site. That conceptual underwriting has to happen before you commit to the deal.
It is a more intellectual process than standard residential lending, and I say that directly because it filters out the brokers who are not willing to do the work. Some people in this business are oriented entirely toward volume and speed. There is nothing wrong with that, but construction lending requires a different gear. The clients who come to us with construction projects are not shopping on rate alone. They are looking for someone who understands what they are trying to build, who can identify problems in the budget before they become problems in the field, and who can hold the deal together when something unexpected happens because something always does.
When a client understands that you have a real command of their project, the relationship changes. You stop being a loan officer and become a trusted resource. That is a harder position for a competitor to displace.
How we rebuilt volume by expanding the product set
At Insignia, we responded to lower single-family volume the same way any business should respond to a shrinking core market: we got better at more things. Over the past few years, our team has invested heavily in developing underwriting capability across construction loans, smaller-balance commercial loans up to around $10 million, mixed-use properties, apartments, and bridge-to-sell transactions. We did not just tell clients we could do these deals. We put in the work to actually understand them.
I will be honest about what that process looked like in the early stages: there was a fair amount of failure. You work a deal, you miss something, you lose the transaction, or you close it and learn the hard way what you should have caught. You try again. Over time, that accumulated experience becomes a capability that is genuinely difficult to replicate from a standing start. Our team is now doing real work across asset classes that most boutique residential shops have never touched, and that has been the key to sustaining volume through a market that punished brokers who stayed in one lane.
The housing supply gap in this country is not closing quickly. Input costs are elevated. Regulatory environments in states like California add layers of complexity and cost that have to be factored into every project's economics. None of that is going away. What it means for brokers is that the demand for construction financing, particularly for consumers who want to modernize older properties or build new on existing lots, is structural, not cyclical.
The brokers who develop genuine expertise in this space now are not just adding a product. They are building a practice that compounds. Construction clients refer to other construction clients. Developers who trust you bring you into larger and more complex transactions. And in a market where most originators are competing on the same conventional products with the same rate of conversations, the ability to solve a problem that almost nobody else can solve is the most durable competitive position there is.
