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Unformatted text preview: ol for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 2. THE MONEY MARKET
Employment – Availability of jobs affects personal income, which affects the demand for housing which in turn influences the demand for mortgage money. Population – The number of people requiring housing determines the need for mortgage money. Demographics – Such variables as age composition and family structure of the local population affect the housing and mortgage markets. For example, the majority of buyers are traditionally 25–44 years of age. Government – Local government policies (taxes, zoning, services, etc.) are a major factor in determining the costs to build and own properly. Climate – Weather conditions affect costs of construction and maintenance; costs are often less in mild climates. Development level – In a fully developed community, demand for new construction is less than demand to refinance for rehabilitation. Financing for rehabilitation tends to be less expensive than for new construction. INSTITUTIONAL FACTORS
As a rule of thumb, it takes a spread of 2% to 5% between the interest paid by lenders and the interest paid to lenders for them to break even. Individual Institutional lenders vary in where they set this ratio. Normally, the cost of borrowing mortgage money fluctuates depending upon the following considerations affecting lenders: Deposit Cost – The cost of obtaining money from depositors, in order to have money to offer borrowers. • • How much interest must savers be paid in order to attract their money into lending institutions? What is the cost of advertising and promotion in order to attract savers? Sales Cost – The cost of marketing loans to borrowers. • What are the costs involved in attracting loans? Dynasty School (www.dynastySchool.com) 2-11 REAL ESTATE FINANCE
• How much must be spent to get good loan applications coming steadily in to the lender? Administration – How much does it cost to operate the institution, taking into account rent, utilities, salaries, overhead, etc.? Reserves – What legal re...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10