If you need short-term financing to buy a new home before selling your current one, a bridge loan can be the ideal solution. As a local homebuyer, it’s important to find reputable lenders in your area that offer bridge loans with the best rates and terms.
In this comprehensive guide, we’ll explain what bridge loans are, their key benefits, and most importantly, tips for locating the top bridge loan providers near you.
What Are Bridge Loans and How Do They Work?
A bridge loan, also called a swing loan, is a short-term loan that bridges the gap between closing on a new home and selling an existing one.
With a bridge loan, borrowers can secure financing to purchase a new home before listing or completing the sale of their current house.
Bridge loans allow you to
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Make cash offers on the home you want without home sale contingencies
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Sell your property on your own timeline.
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Avoid having to line up closing dates or deal with temporary housing.
Bridge loans are repaid once the current home is sold. Typically they are drawn for 6-12 months to allow time to close on both transactions.
The loan is secured by the equity in the current home, which acts as collateral until sold. This allows borrowers to access funds needed for the home purchase prior to finalizing the home sale.
Top Benefits of Bridge Loans for Homebuyers
Utilizing a bridge loan to coordinate the purchase and sale of properties offers significant advantages:
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Strengthen purchase offers – Bridge loans allow you to put in competitive bids not contingent on selling your existing house.
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Buy and sell on your schedule – They provide flexibility to move according to your timeline versus lining up closing dates.
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Avoid interim housing costs – You won’t need temporary lodging if there’s a gap between closings.
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Access equity – Tap into your current home’s equity now for the down payment on your next home.
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Obtain pre-approvals – Get pre-approved to buy with a bridge loan and traditional mortgage at the same time.
For today’s homebuyers, bridge loans can provide the financing needed to land your ideal home.
How to Find the Best Bridge Loans Near Me
If you’ve decided a bridge loan is right for you, the next step is finding a lender that offers excellent bridge loans in your local area. Here are tips for locating top bridge loan companies close by:
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Check with banks and credit unions – Many local financial institutions offer bridge loan programs.
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Search online listings – Websites like LendingTree allow you to compare multiple lenders at once.
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Ask your real estate agent – Many agents have relationships with reputable bridge loan providers.
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Seek out mortgage brokers – Brokers have access to bridge loans from a wide array of wholesale lenders.
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Compare interest rates – Interest charges can vary, so shop around for the best rate.
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Review loan terms – Each lender will have different qualifying criteria, fees, and repayment structures.
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Research reputation and reviews – Pick an established lender known for great customer service.
Taking the time to research lenders will help you discover the ideal bridge loan option in your local area.
Questions to Ask Potential Bridge Loan Lenders
When evaluating bridge loan companies, here are some key questions to ask:
- What are your interest rates and fees for bridge loans?
- What are the loan terms and repayment requirements?
- How long does it take to get approved and funded?
- What home equity amount and loan-to-value (LTV) ratio do you require?
- Do you also handle the primary purchase mortgage?
- What borrower criteria do I need to qualify and apply?
- How long can the bridge loan period be extended if needed?
- Are there any prepayment penalties if I sell my property and repay early?
Getting answers to these questions upfront will provide the facts needed to make an informed choice on your bridge loan.
What Criteria Do Bridge Loan Lenders Evaluate?
When you apply for a bridge loan, lenders will assess:
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Your credit score – Typically 640+ is required.
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Income and debt-to-income ratios.
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Employment history and stability.
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Assets and cash reserves.
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Your current home’s equity and value.
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The new property you are looking to purchase.
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Your readiness to list and sell the existing home.
Having a strong application based on these criteria will help secure fast bridge loan approval.
How Much Does a Bridge Loan Cost?
Bridge loan costs include:
Interest rates – Usually 1-3% higher than primary mortgage rates.
Origination fees – Around 2-5% of the total loan amount.
Third-party fees – Appraisal, credit check, processing fees.
Closing costs – Typically lower than a standard mortgage.
Get a detailed cost breakdown from lenders to accurately compare options.
How Quickly Can I Get Bridge Loan Financing?
In as little as 1 week you can:
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Complete the bridge loan application.
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Get pre-approved.
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Have the loan undergo underwriting.
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Obtain approval and documentation.
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Close on the bridge loan.
So bridge loans allow very fast financing to move forward with a home purchase.
Mistakes to Avoid With Bridge Loans
When obtaining a bridge loan, be sure to avoid:
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Not getting pre-approved for the permanent mortgage.
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Overestimating the sale price of your current home.
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Not allowing enough time for your home to sell.
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Taking on additional debt before closing.
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Not vetting bridge loan lenders thoroughly.
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Failing to budget for higher bridge loan payments.
With careful planning, these pitfalls can be prevented for a smooth process.
Alternatives to Bridge Loans
If a bridge loan doesn’t fit your situation, alternative options include:
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Contingent sales – Making your purchase offer contingent on selling your existing house.
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Home equity loan – Tapping available equity without buying and selling simultaneously.
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Cash-out refinance – Refinancing your current home to withdraw equity.
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Dual mortgages – Carrying two mortgage payments during the transition.
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Delaying the purchase – Waiting until your current home sells before buying.
The Bottom Line
A bridge loan allows you to buy your next home now while selling your current one later on your own timeline. Just be sure to shop multiple bridge loan lenders in your area to find the best rates and terms.
Follow our guide to locate reputable bridge loan companies nearby and get the short-term financing needed for your upcoming transition.
Frequency of Entities:
bridge loans – 16
lender – 8
home – 7
loan – 5
equity – 3
Residential Bridge Loans & Lenders
A residential bridge loan is a popular way for real estate investors and property owners (homeowners) to borrow against their existing residential property in order to purchase a new property. Residential bridge loans for home purchase can also be used in the reverse order by securing the loan against the new property.
In many cases a property owner wishes to purchase a new owner occupied primary residence but doesn’t have the necessary liquid funds for a down payment. The property owner could sell their current residence and use the proceeds from the sale for the down payment (or all-cash offer), but they would then have to find temporary housing until the purchase of their new primary residence is complete. This logistical hassle of moving twice can be avoided with bridge loan financing from a residential bridge loan lender.
With a residential bridge loan, the property owner is able to pull equity from their existing property to raise a down payment or make a full cash offer for the purchase of a new home. Once the new property is acquired, the original property is sold in order to pay off the residential bridge loan.
Residential bridge loan lenders are less concerned with the credit worthiness of the borrower. Hard money bridge loan lenders focus primarily on value of the property and the borrower’s equity within that property. This is because real estate bridge loans are secured by the equity in the borrower’s home so the lender puts less emphasis on income verification or credit issues when considering whether or not to approve the private bridge loan. This is beneficial for borrowers who may currently have less than ideal credit or issues on their record but have sufficient equity in their property.
Residential bridge loan lenders are able to provide funding very quickly as the source of the funds is fast and flexible private money as opposed to institutional lenders such as banks and credit unions.
Various Types of Real Estate Bridge Loans
Various real estate bridge loans on multiple property types are available, from bridge loans for real estate investors purchasing new investments to residential bridge loans for homeowners moving to a new home. North Coast Financial has the expertise to offer many different types including bridge loans for residential real estate, business bridge loans, bridge loans for home purchase (owner occupied bridge loans), commercial bridge loans and bridge loans for investment property.
Real estate bridge loans are known by many other names including:
- bridging loan
- bridge financing
- bridge loan mortgage
- bridge mortgage
- gap financing
- caveat loan
- interim financing
- swing loan
A multifamily bridge loan is a short-term financing tool that allows a borrower to quickly purchase or refinance a multi unit property. The short-term multifamily bridge loan gives the borrower time to make any needed repairs or improvements, lease any vacant units and then refinance with long-term financing. Multifamily bridge lenders typically specialize in short-term lending of 1-2 years and are able to fund quickly to help the borrower secure the property. Multifamily bridge loan rates are generally higher than what is available from long-term traditional lenders. Bridge financing for multifamily property is available for numerous property types including duplex, triplex, 4 plex (quadplex) and 5+ unit properties.
What is a bridge loan – How do bridge loans work?
FAQ
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