Finance
A bridge loan (swing loan) is typically used to:
AProvide permanent financing for commercial properties
BFinance a new home purchase while the buyer's existing home is being sold✓ Correct
CConvert construction financing to a permanent mortgage
DProvide financing for rental properties over 4 units
Explanation
A bridge loan is short-term financing that allows a buyer to purchase a new home before selling their existing home. It 'bridges' the gap between the purchase and the proceeds from the sale of the current home.
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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.
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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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