What type of loan is used to facilitate the purchase of a new home before the sale of the current home?

The correct answer is a bridge loan, which is specifically designed to provide temporary financing that helps a borrower purchase a new home while they are still in the process of selling their existing home. This type of loan is useful because it allows the buyer to take advantage of a new property without having to wait for their current home to sell.

Bridge loans typically offer a quick approval process and are usually secured by the equity in the borrower's current home. They help to cover the down payment and closing costs of the new home until the old home is sold, at which point the borrower can pay off the bridge loan with the proceeds from the sale.

In contrast, a home equity loan is generally used to borrow against the equity built up in a home, which is not specifically aimed at facilitating a new home purchase. A construction loan is utilized to finance the building of a new home and is not meant for purchasing an existing one. A conventional loan is a standard mortgage option used to buy a home but requires a buyer to have the necessary financing lined up or the property they wish to purchase secured before proceeding.