Finance
Which of the following best describes a 'bridge loan' used by Colorado homeowners?
AA long-term permanent mortgage for new construction
BA short-term loan that 'bridges' the gap when buying a new home before selling the current one✓ Correct
CA loan specifically for bridge infrastructure near waterways
DA government-guaranteed loan for rural areas
Explanation
A bridge loan is a short-term financing solution that allows a homeowner to purchase a new property before their current home sells. It 'bridges' the gap in financing until the old home's sale proceeds are available.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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