Finance
What is a construction loan and how does it convert to a permanent mortgage?
AA construction loan automatically becomes a permanent mortgage
BA construction loan funds building phases and converts (or is replaced by) a permanent mortgage when construction is complete✓ Correct
CConstruction loans and mortgages are the same product
DA construction loan is repaid before the home is sold
Explanation
A construction loan provides short-term financing for building. Funds are disbursed in draws as construction progresses. Upon completion, it either converts to a permanent mortgage (construction-to-perm) or is refinanced into a separate mortgage.
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