How does a Bridge Loan work?
A bridge loan serves as a financial solution to facilitate your new home purchase when funds are not readily available. Typically used for covering closing costs, you can approach a lender to apply for a bridge loan. While terms may vary, the standard practice is to borrow up to a maximum of 75% of both your current home’s value and the prospective home’s value.
Qualifying for a Bridge Loan?
Getting a bridge loan for home purchase involves meeting certain criteria. Lenders assess standard qualifications such as your debt-to-income ratio, home equity, credit score, and household income. A favorable track record as a mortgage candidate for your initial home is advantageous. Lack of sufficient equity in your current property might pose challenges to qualify. Demonstrating an ideal candidacy will expedite the approval process for a bridge loan compared to a traditional mortgage.
How to repay a Bridge Loan?
Repaying a bridge loan typically spans a 12-month term for a primary home before repayment period begins. Structuring the loan to utilize proceeds from selling your current home can be very beneficial. Be mindful of the final due date for complete repayment and establish clear repayment terms.
Pros and Cons of Bridge Loans:
- Avoid Contingencies: In a competitive market, a bridge loan can enhance the competitiveness of your offer by eliminating financial contingencies.
- Fast Process: is faster than selling your current home and makes buying the next home easier!
- Interest Rates are Higher: Due to their short-term nature, bridge loans incur higher interest rates.
- 12-month loan term only. Not Renewable. Default interest rate is 12% if loan is not repaid when due.
When your ready to get started on your Florida Bridge Loan, we are experts to guide you through the entire process, the first step is getting you pre-approved. You can apply online or you prefer to speak with one of our Bridge Loan Mortgage Experts, we would be happy to speak with you. Call or text us at 407-955-4575.