Are you wondering who offers bridge loans?
Demand for bridge loans is rising because of the growing home rental market. These loans serve as a lifeline for people looking to sell their old homes and pay for a new one.
If you happen to be one of these people, where do you go for a bridge loan application? Continue reading below for a closer look.
What is a Bridge Loan?
Some people call bridge loans “gap financing” because they bridge the gap between buying a new home and selling your current one. Circumstances like job relocation may force someone to sell his old home and move to a new one.
Others apply for a bridge loan when the closing date of their new home purchase comes after closing the sale of the old one.
Unfortunately, not everyone has the money to cover the down payment for the new property. A bridge loan fills this financial gap by giving you funds to finance the new home.
Most people use bridge loans to cover the closing costs. Meanwhile, lenders will let you borrow up to 80% of your old home’s value and the value of the property you’re looking to buy.
A bridge loan typically lasts about a year until your repayments begin. It also comes with a final due date to complete the repayments in full. The key is to structure friendly payment terms with the lender.
You can also find bridge loans for investors who wish to flip properties using short-term financing.
Who Offers Bridge Loans?
Many local banks, credit unions, banks, and online lenders offer bridge loans. Like applying for traditional loans, the lenders will consider different factors before approving your application.
The lenders will check your credit history and credit score. They’ll also look at your debt-to-income (DTI) ratio to determine if you can pay the loan. Generally, applicants with excellent credit ratings and a low DTI ratio are likely to score approval.
Pros and Cons of Bridge Loans
Bridge loans have a faster application and approval process than traditional loans. It allows you to immediately use your old home’s equity on your new purchase.
You can close the deal on the new property even if your current home is still on the market. It also eliminates that need for a sale contingency.
Meanwhile, bridge loans have closing costs. You may also need to pay for a home appraisal. Since the application and approval don’t take long, the trade-off is a higher interest rate. Lastly, they’re more expensive than a home equity loan.
Learn More Beyond Bridge Loans Now
Now you know who offers bridge loans and how they work. Use the knowledge to contact your trusted bank or lender and ask about your options.
However, finding the best loan is only one of the many financial challenges you’ll face.
Check out our other articles on finance and money management. We also share other helpful topics on our website https://rumpletech.com.
