If you are selling a home and looking for another home to buy simultaneously, the timing can be tricky. While it's better to sell first, you may find a great home for yourself before that happens. The lending industry has sellers like you covered, though. Bridge loans help sellers and buyers bridge the gap when they need to make several important financial moves at the same time. Read on and learn more facts about bridge loans for buyers.
- In most cases, the money for the down payment comes, in part, from the sale of the current home. However, a bridge loan allows buyers to buy a new home even before the old one has sold using the home's equity. The amount you can borrow on a bridge loan depends on how much equity you have in your current home.
- Without a bridge loan, buyers may need to add a contingency specifying that their present home must be sold before they can take ownership of the new home. A bridge loan means that contingency is unnecessary. While contract contingencies have their place, they may be problematic in a tight market with buyers facing a lot of competition. Keeping contingencies to a minimum can make the difference in having your offer accepted over another buyer's offer.
- Bridge loans are for a short term and the terms can vary. They usually have minimum and maximum limits, but the amount is often enough to ensure funds for at least a down payment on the new residence. Without a down payment, buyers can face the extra expense of a monthly PMI (private mortgage insurance) payment. Even the smallest aspects of mortgage approvals can make or break a purchasing opportunity.
- This way of bridging the gap also prevents buyers from stressing out over the relatively short period of time that can exist between selling a home and finding a new one to buy. It provides buyers with the ability to jump on a home quickly that might otherwise be unavailable once their current home sells.
If you are interested in a bridge loan, know that your lender will ask for a professional appraisal to be performed. That determines the amount that can be loaned. The lender also requires that your present home already be on the market or under contract at the time of the loan application.
Speak to a home loans service to find out more about mortgage bridge loans.
Share