Alabama Real Estate Practice Exam

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Prepare for the Alabama Real Estate Exam. Utilize flashcards and multiple-choice questions, each coupled with hints and explanations. Ace your upcoming test!

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What does a construction mortgage finance?

  1. The purchase of a pre-existing building

  2. The renovation of a home

  3. The cost of constructing a new building

  4. The purchase of construction equipment

The correct answer is: The cost of constructing a new building

A construction mortgage is a type of loan specifically designed to finance the construction of a new building. This means it will cover the costs associated with building materials, labor, and permits. Option A is incorrect because a construction mortgage is not used to purchase pre-existing buildings. Option B is incorrect because a different type of loan, such as a home renovation loan, would be used for that purpose. Option D is incorrect because a construction mortgage is not used to purchase equipment, only to finance the actual construction of a building. Therefore, option C is the only correct answer.

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