Finance
What is a 'bridge loan' and when might a Pennsylvania homebuyer use one?
AA loan used to finance construction of new roads and infrastructure near a development
BShort-term financing allowing a buyer to purchase a new home before selling their existing home, using the existing home's equity as collateral✓ Correct
CA Federal Home Loan Bank product bridging the gap between down payment and 20%
DA PHFA program bridging the income gap for first-time buyers
Explanation
A bridge loan is short-term financing (typically 6–12 months) that allows a homeowner to purchase a new home before selling their existing home. The bridge loan is secured by the departing home's equity, providing funds for the new purchase.
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Key Terms to Know
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.
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.
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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