When Do You Need a Bridge Loan?
The process of buying and selling was once long and complicated. Not anymore. Bridge loans take the stress out of trying to buy while waiting to sell. Especially with today’s market of quick sales and discerning sellers, bridge loans offer fast, non-contingent options for a smooth transition.
What is a Bridge Loan?
Like the name says, bridge loans bridge the gap between the sale of a buyer’s current home and the purchase of a new one. The buyer’s equity is used toward the down payment on their next home and, when their existing home sells, the bridge loan is paid off.
What Key Benefits do Bridge Loans Offer?
Bridge loans are especially helpful because they allow buyers to move fast, get more, and give non-contingent offers.
- Buyers can confidently make offers knowing that they are not in the limbo between selling and buying. They can also easily agree to the tight closing schedules that have become so common in today’s market.
- The sale of the existing home doesn’t have to be rushed. Buyers can take their time staging the home, reviewing offers, and going over any additional details.
- Buyers can make non-contingent offers on prospective homes. These non-contingent offers are much more appealing to sellers as they eliminate risk and uncertainty entirely.
Bridge Loans vs. Traditional Loans
Bridge loans are an especially beneficial option for those with a rigid moving deadline that need a quick lending option.
Say you are being relocated for work and, as it comes time to move, your existing home still has not sold. A bridge loan will allow you to both receive and pay off funds quicker than an alternative like a home equity loan. Bridge loans generally have quicker application, approval, and funding processes than traditional loans, and with their 6-month window, are paid off faster.
How do I Know if I Qualify?
Qualifying for a bridge loan is much like qualifying for a conventional one. Standard requirements for a loan include; proof of income, bank statements, credit history, and a debt-to-income ratio of 45% or less. For bridge loans in particular, a credit score of 700+ and 6-months worth of mortgage payments in the bank is required. Finally, your DTI needs to qualify based on housing payments for both your new and existing home. The best way to find out if you qualify is by talking to a mortgage banker.
If you are looking into a bridge loan, trust UHL as your lender. Why? Because we put forth the same dedication to being the experts, offering the lowest rates, and personalizing the experience for every client served as we do with all of our loan products. Contact one of our loan experts today.