If you want to buy property but don’t have immediate access to the cash to do so, consider a bridge loan.
Bridge loans provide short-term financing commonly used for transition periods. If you need to purchase a property before you can sell one that will help finance the costs, a bridge loan allows you to move quickly and buy when you need to.See What You Qualify For
What is a Bridge Loan?
With a bridge loan you can qualify for a short-term mortgage that will “bridge” the gap between the financing you need to purchase property and the current cash you have available.
It works well for homeowners who may use the immediate cash of a bridge loan to put a down payment on a new home, while waiting for their current home to sell.
Real estate investors may use bridge loans to cover the gap between purchasing one property without having to wait for the sale of another. When a property then sells, you can pay back the bridge loan with the money made from the sale or by getting another type of loan for the property you just purchased.
How to Get a Bridge Loan
Following are the typical steps and qualifications needed for a bridge loan.
The Financing Process
By sharing basic information about your potential purchase and plan to pay back a new loan, we’ll work with you to see if a bridge loan meets your needs and whether your situation qualifies.See What You Qualify For
Bridge Loan Requirements to Meet
These are some of the common requirements often needed to qualify for a bridge loan. If you have questions about these requirements, we’re here to help.
- We’ll need to know the value of the current property and the property you’re buying
- A summary of how much you’d like to pull from an existing property to put down on the new property
- A credit score of 680+
- Income and asset documentation, and authorization to pull a credit report.
Bridge Loan FAQs
Financing your next property is an important step in reaching your investment goals. It’s normal to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.
Bridge loans are available to a range of people, from real estate investors to homebuyers, businesses to consumers. They can be used to finance various property types, including single-family, multi-family, mixed-use, and commercial property.
Whether you need to relocate your company’s office to a new city before selling your current building, you need to make an offer on a new home before your current one sells, or you need to buy an investment property before you’ve sold another, a bridge loan can help you with the transition.
If your situation and the property qualifies, bridge loans are useful anytime you need temporary financing to help you make the next move with your real estate investments.
Bridge loans provide financing for a specific investment purpose. They cover the costs of purchasing a new property before the sale or another or before you can get long-term financing for the property. For this reason they’re offered with shorter term lengths, meant to cover the timeline of your transition.
They meet unique financing needs to bridge the cash gap by offering flexible qualification requirements based on the value of the property you need to finance. This makes them more accessible than standard loans that require certain income and other documentation that is related more to the borrower’s personal finances than the property itself.
The minimum requirements vary depending on the situation and can be more flexible than standard banks allow. In many cases a credit score of 680 or higher is often best.
Bridge loans are often interest-only, meaning you pay only the interest for the outstanding loan balance each month. The full amount you borrowed isn’t due until the end of the loan term.
In many cases, you don’t need to make monthly payments during the first few months after closing a bridge loan but will need to from there until you can pay it off completely.
How you pay off the loan will depend on your unique situation. There are a handful of options. For example, you could pay off the bridge loan from the profits you make selling a property you currently own. In some cases, you may be able to refinance the bridge loan to a new loan type that is intended for making long-term payments.
There are closing costs associated with processing any loan, and the costs of a bridge loan are comparable to standard mortgages. They include costs for the lender to service the loan, as well as an appraisal and other fees.
You’ll also need to make a down payment that will be paid at closing. The down payment amount will depend on the specific details of your project and your equity.