Finance
In North Dakota, a 'construction loan' differs from a permanent mortgage in that:
AConstruction loans are for 30 years
BConstruction loans are short-term, interest-only loans that fund the building process and are converted to a permanent mortgage upon completion✓ Correct
CConstruction loans require no down payment
DConstruction loans are only available to licensed contractors
Explanation
A construction loan is a short-term (typically 6-18 months) interest-only loan that funds construction as work progresses through draws. Once construction is complete, the borrower converts (or pays off) the construction loan to a permanent long-term mortgage.
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Key Terms to Know
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
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