Bond loan

What is a Bond Loan?

A bond loan, or a mortgage revenue bond, is a special type of loan offered by local or state government entities to help individuals and families with low-to-moderate income purchase their homes. The government agencies issue bonds to investors and use the proceeds to provide loans to eligible homebuyers, thus the name ‘bond loan’. These loans typically feature below-market interest rates, making homeownership more affordable.

How Does a Bond Loan Work?

Government agencies issue mortgage revenue bonds to raise funds. These bonds are sold to investors who are willing to accept lower returns in exchange for the tax benefits associated with these bonds. The funds raised from selling these bonds are then used to provide home loans to eligible individuals and families. The interest rate on bond loans tends to be lower than the rates on conventional home loans, making monthly payments more affordable.

Who Can Qualify for a Bond Loan?

The eligibility criteria for bond loans can vary from state to state or from one local agency to another. However, they are generally designed to help first-time homebuyers or those who haven’t owned a home in the last three years. Other common requirements include income restrictions, purchase price limits, and the requirement to complete a homebuyer education course.