Finance (alternative)
In Maryland, a 'construction loan' for a new home is typically converted to a:
ACash purchase after construction
BPermanent mortgage (end loan) upon completion of construction✓ Correct
CLine of credit
DCommercial loan
Explanation
Construction loans fund the building process and are typically converted to a permanent 'end loan' (standard mortgage) upon completion of construction and issuance of a certificate of occupancy.
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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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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