Finance
In New Mexico, a 'bridge loan' is used when a buyer needs to:
AFinance a bridge construction project
BFinance the purchase of a new home before their current home has sold, using equity in the current home as collateral✓ Correct
CRefinance from an ARM to a fixed rate
DObtain down payment assistance from the government
Explanation
A bridge loan is short-term financing that allows a buyer to purchase a new property before their existing home is sold. It bridges the gap between purchase and sale, using the equity in the current home as collateral.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
Math Concepts
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