The ability to purchase a home before selling your current house seems like something out of a fairy tale. Most people depend on the sale of their existing house to buy the new one.
At HML Solutions, we understand the nuisance of buying and selling simultaneously. Staging your current property, cleaning, and dusting every time you leave, inconvenient showings, etc. While the process is a nightmare, most homeowners do not have a choice but to suffer through it, especially when they count on the equity of their current home to purchase the next.
Most sellers do not want to work with homebuyers who make offers with financial contingencies. The risk of a buyer pulling out is too great with contingencies, and it is impractical in a seller’s market.
Thankfully, homebuyers have another option: a bridge loan. The loan allows buyers to finance a new property while waiting for their current house to sell.
Understanding a Bridge Loan
A bridge or gap loan helps bridge the financial gap between sales. The loan is a short-term solution, typically carrying a term length between three and 12 months. Most bridge loans accumulate interest over the life of the loan, compiling it into a balloon payment. Many agreements allow early repayment, and because of the higher than usual interest, the sooner you can pay back the loan, the better.
Our Bridge Loan Program
While a bridge loan uses an existing property as collateral for the loan, our program still requires applicants to meet specific expectations. In order to qualify for our bridge loan program, you must:
- Have a FICO score of 700 or better
- Have a low debt-to-income ratio
- Have an annual income of more than $125,000
Not all lenders will have these qualifications, but we found them to be necessary. Short-term loans are inherently risky for private lenders, and to make the lending process worth it, we need to make several restrictions and increase the interest rates of the loans.
If you are a qualified applicant, we can offer bridge loans up to 80% of the combined value of both homes. For example, if your house is $200,000 and the home you wish to buy is $300,000, we can offer a loan up to $400,000.
Reviewing the Pros and Cons of a Bridge Loan To Purchase a Home
All loans have pros and cons. For some people, bridge loans are too risky, as are most short-term loan options. However, we know a short-term bridge loan can make all the difference in a seller’s market, often being the edge that secures you a new property.
Our bridge loan program has several advantages. Some of the most beneficial reasons for opting for this loan include:
- Competitive advantage in a seller’s market
- Fast approval and funding
Despite the advantages, there are risks to the loan. The primary risks include:
- High-interest rates
- Risks of two mortgage payments
If you qualify for a bridge loan, you need to prioritize the selling of your current home. While the loan gives you a little freedom to buy a new house without selling your existing one, holding on to two properties can be problematic, even in the short term.
Let Our Team Help
A bridge loan is a potential solution for securing a new home before the sale of your current house. However, it is not the only option. Our team of financial experts can help you by reviewing your finances, budget, and history to determine the best loan programs and financing options available to you.
We have a vast portfolio of financial products. We offer short-term options like bridge and hard money loans, or we have programs for long-term investors. Choosing a loan program is not something to decide on a whim. You need to ensure that you have done your research and understand your potential responsibilities.
Thankfully, you are not alone. Our team of real estate and finance experts can walk you through the specifics of all our programs. They can also help you select the best option for your experience level and financial history. Contact our offices if you are ready to purchase a new house or invest in the market. Contact HML Solutions today to get started.