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Unformatted text preview: plans of the owner. Usually, a general contractor hires and supervises all subcontractors used on a job. Common contracts that determine how a general contractor is paid, such as: installment contract, lump sum contract, cost–plus–price contract, and guaranteed price contract. Owner–Builder Work – An owner acts on his own behalf rather than through a general contractor and hires contractors (“subs”) to handle the work. Heavy construction jobs done by major corporations or by government agencies often use this method. Speculation – Most housing tracts and many commercial and industrial buildings are constructed at the contractor's own expense in hopes of selling at a profit after completion. Dynasty School (www.dynastySchool.com) 2-3 REAL ESTATE FINANCE SALE FINANCING
The most common source of demand for mortgage money is the financing of a property to make it possible for a buyer to make a purchase. This is true for both new and resale properties. REFINANCING
This is usually the replacement of an old loan with a new loan in order to: Pay for rehabilitation or modernization Obtain more advantageous loan terms Consolidate two or more loans in a single mortgage or trust deed Raise money for other purposes. STRENGTH OF DEMAND
International, national, local and Institutional factors all affect the strength of demand for mortgage money. Effective demand is demand backed by ability to pay. Two major factors affecting the strength of effective demand are: Loan–to–Value Ratio – This is usually expressed as a percentage. It is the relationship between the mortgage loan amount and the appraised value of a property. The higher the loan–to–value ratio, the smaller the down payment needed. Example
If a home is appraised at $100,000 and the lender will lend $50,000, then the loan– to–value ratio is: $50,000 / $100,000 = 1/2 = 50% loan–to–value ratio. Loan terms – Terms are the conditions for borrowing the money: length of loan, amount lent, monthly payments, interest rate, etc. These directly affect the cost of the loa...
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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