Finance
A bridge loan in real estate is a short-term loan used to:
AFinance bridge construction on rural properties
BBridge the gap when a buyer purchases a new home before their existing home sells✓ Correct
CFinance major renovation projects in commercial properties
DFund agricultural irrigation systems
Explanation
A bridge loan provides temporary financing for a buyer who needs to purchase a new home before their current home is sold. It 'bridges' the financial gap until the old home closes.
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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.
Promissory NoteA written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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