Are you a current homeowner looking to purchase a new home quickly? Many homebuyers plan on using the funds from the sale of their current home to purchase their new property, however sometimes the closing and sale dates don’t always coincide, and can cause financial stress. In cases like these, a bridge loan can provide financing for the new home if you are unable to access the money you were anticipating on your other home sale. If you are interested in learning more about bridge loans in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, Foundation Mortgage can help.
What Are Bridge Loans?
Bridge loans, also sometimes referred to as interim financing or swing loans, are short term loans typically used in a real estate deal when the buyer does not have sufficient funds to finance the purchase of a new home because they have not yet sold their initial property. A bridge loan offers a way to immediately buy a new home and bridge finance the gap before selling your current home. Usually, the amount you can borrow with this type of loan is 80% of the total combined value of both your current home and the home that you intend to buy.
How Do Bridge Loans Work?
A bridge loan essentially assists buyers with purchasing a new home while they are waiting to sell their old home. Borrowers can use the equity in their current home to afford expenses for the new home, such as closing costs or a 20% down payment, (which allows the buyer to avoid paying private mortgage insurance). Bridge loans can also help you have an advantage over other buyers because they offer the appropriate amount of funds quickly to allow for an expedited sale. It is important to note that bridge loans usually have higher interest rates than other loan types, and homeowners who haven’t paid off their original mortgage sometimes end up having to make two payments until the first home is sold, (for both the original mortgage and the bridge loan).
Bridge loans usually must be paid off in a year, and most borrowers use the money from the sale of the previous home to pay off the bridge loan. Bridge loans offer several benefits, including rapid financing, flexibility to purchase the home you want before selling your old home, sellers may be more favorable to offers that aren’t contingent on the sale of another home, and convenience if you need to move quickly. To qualify for a bridge loan, lenders usually require a good credit score and a low debt-to-income ratio, (DTI).
Assistance Applying For a Bridge Loan
If you are looking for a way to fund the purchase of your second home, and want to know more about bridge loans in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, of Gatlinburg, Tennessee, contact Foundation Mortgage today. Our loan specialists can work closely with you to purchase your next ideal home.