Thinking about moving but concerned about whether you’ll be able to sell your home before signing a contract on your new dream home? Enjoy flipping homes and want to get started on a new house before your latest masterpiece sells?
Whether you flip homes for fun or are planning to move to another home, a bridge loan can help you secure the financing you need to ease the transition between selling a home and purchasing a new one. Many homeowners’ assets are tied up in their property—their equity. When it comes time to purchase another property, they generally need to sell their initial property in order to place a down payment on a new property. However, because there is no guarantee for when a home will sell, this places them in a difficult position. A bridge loan helps make this transition process easier.
If you’re wondering about whether a bridge loan can help you get from point A to point B, here’s what you need to know.
What Is a Bridge Loan?
A bridge loan is so-called because it helps homeowners or real estate enthusiasts fill the financing gap between buying a new property while they are still selling another property. It is sometimes also called a bridge mortgage or a bridging loan.
When you’ve found the perfect home or are on the lookout for the right bargain property to flip, it can be hard to secure funding if you haven’t already sold your previous home. While you can put in an offer on a home on the contingency that your current property will sell, this could jeopardize your ability to secure the home you’re dreaming about. A bridge loan can help you negotiate your contract and ensure that your offer is considered.
A bridge loan can help you cover the down payment or closing costs on a new home. This short-term loan can then be paid off when your current home sells. Even if you have some money to put towards a down payment on a new home, a bridge loan can help you put down more money so you can avoid mortgage insurance or receive better terms.
How Much Can I Borrow Through a Bridge Loan?
The amount of your bridge loan will depend on the equity you have in your current property and the lender you choose. Generally, you can borrow up to a certain percent (often between 60-80%) of the equity you have in your current property. Some lenders also allow borrowers to use a bridge loan as a second mortgage, lending a percentage of the value of the first home, which is then paid off when the home sells. To determine how much you may be eligible to borrow, call Associates Home Loan today at 813-328-3632.
How Do You Get a Bridge Loan with Associates Home Loan?
Applying for a bridge loan with Associates Home Loan is simple. We want to ensure Floridians can easily apply for the loan products they need. You can start your application on our website at any time by clicking “Apply Now.” Alternatively, you can stop by our office or give us a call at 813-328-3632. Our friendly loan professionals are always available during business hours.
Who Can Apply for a Bridge Loan?
To be eligible for a bridge loan from Associates Home Loans, you must be purchasing a property in Florida. You don’t need to already be a Florida resident, and you don’t need to have excellent credit. In fact, Associates Home Loan is proud to help individuals who are rebuilding their credit.
Are There Long-Term Bridge Loans?
Unfortunately, there are not long-term bridge loans. Because the goal of the bridge loan is to help property owners during a very particular set of circumstances, bridge loans have a short loan term of up to 12 months.
If you need a longer-term loan, please browse our other loan offerings or contact us for more information about our loan products.
Can I Get a Bridge Loan at a Traditional Bank?
Residential bridge loans are not generally available at traditional banks. Often, the best way to get a bridge loan is to check out your local hard money lender. Associates Home Loan is proved to offer consumer bridge loans and other mortgage loan products to individuals looking to purchase real estate in Florida.
What Are the Fees for a Bridge Loan?
The interest rate for a consumer bridge loan is generally higher than that of a mortgage from a traditional lender. The exact interest rate will vary depending on the specifics of your loan application, however, most fall within the range of 8 to 10%. In addition to the interest, lenders may charge origination or servicing fees.
When Is the Best Time to Apply for a Bridge Loan?
If you are in the market for a home and are ready to make an offer on a new property but haven’t sold your existing property yet, applying for a bridge loan can help you secure your new property without worrying about when your existing property will sell.
To ensure you’re able to make an offer when you find that property you just have to have, you’ll want to apply for your bridge loan early. That way, you can make a competitive offer that isn’t based on contingency or on a loan application. Knowing that you’ve been approved will make the process easier.
How Long Does it Take to Apply for Bridge Loan?
Because bridge loans are short-term loans that have a specific goal, the application process and turnaround time can be pretty quick. You can make your application process run more smoothly by ensuring you have all the documentation your lender requires.
At Associates Home Loan, we try to close and fund all our loan products in 7 to 14 days.
Does a Bridge Loan Require Collateral?
A bridge loan requires that your current property is used as collateral to secure the loan. Once your home sells, the expectation is that the proceeds of the sale will go towards paying off the bridge loan.
What Do I Need to Apply for a Bridge Loan?
Loan requirements will vary among different lenders. If you are considering applying for a bridge loan, you may need to meet the following requirements
The most important thing you need when applying for a bridge loan is equity. Ideally, you should have at least 20% equity in your current property.
In addition, you may need to also share:
- Copies of pay stubs for each applicant, reflecting a minimum of 30 days of income
- Names/addresses of employers for two years
- W-2s for two years
- One to two years of tax returns
- A completed and signed Form 4506-T or 4506T-EZ, provided by your Mortgage Banker
- Bank statements for two to three months
- If self-employed, year-to-date profit and loss statement, plus signed returns for last two years
- Proof of pension income, if applicable
- Social Security and Disability payments, if applicable
- Dividend earnings
- Child support or alimony payments (optional for you to disclose)
- Information on debts such as car loans, student loans, and credit cards
- Security accounts (stocks, bonds, life insurance)
To know exactly what you’ll need to apply for a bridge loan from Associates Home Loan, contact us today.
How Do I Qualify for a Bridge Loan?
Ultimately, different lenders have different requirements. The best way to determine whether you may qualify for a bridge loan is to speak with a skilled loan professional. Most lenders will take several factors into account when considering whether to grant a bridge loan, including the amount of equity you have in your home, your debt-to-income ratio (how much of your income goes towards servicing your debts),
How Long Will it Take to Learn if I’m Approved for a Bridge Loan?
Applying for any loan can seem daunting. We understand that this can be a very important financial decision for you and we don’t take it likely. We do our best to quickly assess loan applications and to fund loans as soon as possible to help our customers. While the exact time will vary for different applicants depending on their particular situations, we aim to have loans reviewed and, if approved, funded within 7 to 14 days.
When Will the Bridge Loan Be Disbursed?
Each loan is different, and how quickly your bridge loan is disbursed will depend on your lender.
At Associates Home Loan, we try to have all of our approved loans disbursed within 14 business days of the application date. We understand the importance of having your loan funds available so you can quickly act on any exciting properties.
What Is the Difference Between a Bridge Loan and a Hard Money Loan?
Both a bridge loan and a hard money loan require you to have equity in your current property and that your property be used as collateral to secure the loan. However, their goals differ. While a bridge loan focuses on the short-term goal of helping you purchase a new property, a hard money loan can be used in a variety of ways. In addition, depending on your lender, a hard money loan can have a longer term than a bridge loan. It’s important to note that some lenders do call their bridge loans “hard money bridge loans,” though this does not extend the terms of the loan. It merely reflects that, in general, individuals who apply for a bridge loan are in a difficult situation.
Can I Get a Bridge Loan with Poor Credit?
Whether you can get a bridge loan with poor credit will depend on your lender.
Associates Home Loan prides itself on helping individuals who have financial difficulties get back on their feet. While traditional lenders will balk at funding a loan for an individual with a low credit score, we offer bad credit loans and hard money loans to help them meet their needs.
Your ability to secure a bridge loan with poor credit will depend on a variety of factors, including the amount of equity in your property, your income, your debt to income ratio, and more.
Every situation is different. The best way to ascertain whether you’re eligible for a bridge loan is to speak with one of the professionals at Associates Home Loan.
What Are the Risks Associated with a Bridge Loan?
Every loan product carries a risk, with the main risk being the inability to pay it off. When you agree to a bridge loan, your current property is used as collateral to secure the loan. If you default on the loan, ownership of the property will be transferred to the lender.
Because bridge loans are short-term loans, they must be repaid, with interest, within 12 months. When considering a bridge loan, you’ll want to calculate your monthly payments and determine whether you can pay back your loan according to the loan terms. Ideally, your property will sell and you will be able to put those funds toward repayment. There is a chance, however, that your current property won’t sell.
How Do I Ensure My Lender Is Reputable?
The lending market is constantly expanding. Consumers must be vigilant and well-informed to ensure they aren’t taken advantage of by predatory lenders. There are many loan portals that claim quick, easy loans. To ensure the lender you are considering is a reputable lender, start by checking their Better Business Bureau rating.
Associates Home Loan currently has an A+ rating from the BBB. We’ve been supporting Floridians and Florida property owners for 17 years and have built a reputation as a helpful loan company bent on getting people the loan products they need. Plus, we are committed to offering great customer service.
Still not sure if a bridge loan is for you? No problem, simply call one of our skilled loan representatives for more detailed answers to your specific questions. We’d be happy to help!