Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
24 Cards in this Set
- Front
- Back
|
How do Construction Loans differ from regular financing on an existing structure? |
A construction loan is short-term; 9-12 months 18-24 for Major projects |
|
|
What are the two basic kinds of construction loans? |
A combination loan, which combines a construction loan with a permanent take-out mortgage. Requires only one loan closing. An interim, short-term, straight construction loan with a permanent take-out mortgage and requires only one loan closing. |
|
|
Before deciding to do a construction loan, what things will the lender consider? |
Plans and specifications Breakdown of costs Contract Repayment plan Financial information |
|
|
How are the payments on a construction loan disbursed? |
Lenders can disburse funds using: the draw method the percentage-of-progress system the voucher method a builders control service |
|
|
What is a take-out loan? |
A promise by lender that if certain conditions are met, the lender will issue a permanent loan once construction is completed. |
|
|
Subordination clause? |
*typically found in blanket mortgages = an agreement to reduce the priority of an existing loan to allow a new future loan to take higher priority. |
|
|
Partial Release Clause? |
*commonly found in blanket mortgage = allows lots to be released from the blanket loan when paid |
|
|
Rental Achievement Clauses? |
= before granting a construction loan on a proposed rental property the lender usually requires the develop-borrower to pre-lease |
|
|
Gap commitment? |
Guarantees that the developer will have access to the difference between the floor loan and the upper level of the permanent loan if the developer does not reach his or her rental goals. Lenders charges a fee. |
|
|
Mechanics lien? |
An enforceable claim that secures payment to contractors, subcontractors and materials suppliers for work they performed in constructing or repairing a building. |
|
|
Pre-Lien Notice? |
advises the recipients that the party sending the notice may have the right to attach a lien to the owner's property if he or she is not paid for the performed services |
|
|
Mechanics liens.. (notice of completion) |
If owner files notice of completion within 10 days the original contractor has 60 days to file a mechanics lien. If NO notice.. the contractor has 90 days. |
|
|
What is an assessment lien? |
Imposed on properties that will benefit from capital projects |
|
|
Vrooman Street Act |
Gives Authority to city councils to grade and finish streets, build sewers and perform others improvements. Allows for an election. provides for the acquisition of public utilities. |
|
|
Street improvement act of 1911 |
Utilized more than any other street act. Allows municipalities to issue bonds ordering the improvements and allows assessments to be paid in equal installments during the term of the bonds. |
|
|
Improvement Bond Act of 1915 |
Allows public agency to issue bonds for subdivision street improvements. Usually carry an interest rate of 6% |
|
|
Mello-Roos Community Facilities Act of. 1982 |
Allows a wider range of facilities and services than other improvement bond acts and does not require that the improvements benefit individuals properties. principal amounts of tax bonds are not tied to any specific parcels |
|
|
Purchase-Money Mortgage |
A common method of seller financing that delivers a mortgage that will secure the note given as partial payment for the land. |
|
|
Installment Land Contract |
Seller keeps title and sometimes keeps possession and use of the land as well. |
|
|
Optioning Land |
Does not incur any holding costs, such as taxes, insurance, interest and maintenance, until the option is exercised. |
|
|
Different types of disbursements |
Draw System - Payments are made in stages as construction progresses Percentage-of-progress system - Funds are disbursed incrementally based on 90% of work in place Voucher system- Money is paid out when the builder gives the lender the receipts from licensed building contractors, etc Builder's control service - Funds are paid out by an outside third party acting as an intermediary for the disbursement process |
|
|
Soft Costs |
Include: Profit, overhead, and supervision |
|
|
Which disbursement method holds back part of payment until Mechanics lien is cleared? |
percentage-of-progress |
|
|
What's it called when a seller-lender agrees to allow the conv. lender to become the senior lender? |
subordination. |
