Finance
What is the primary difference between a construction loan and a permanent mortgage?
AConstruction loans have fixed rates; permanent mortgages have adjustable rates
BConstruction loans are short-term and disbursed in draws as construction progresses; permanent mortgages are long-term financing secured by a completed property✓ Correct
CPermanent mortgages require no down payment; construction loans require 50% down
DConstruction loans are only available through the FHA
Explanation
Construction loans are short-term (typically 6–12 months), interest-only loans disbursed in stages (draws) as construction milestones are met. Once construction is complete, the borrower typically obtains permanent financing to pay off the construction loan.
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