What is a Bridge Loan and Who Should Get One?
A bridge loan is a short term loan used to allow you to "bridge" the gap between purchasing your new home and selling you old one. In other words, they are designed to allow you to buy before you have closed the sale. The bridge loan is secured on the equity in the old house and generally runs for six months. This can be particularly valuable to people who have to relocate in a hurry. However, bridge loans tend to have higher interest rates than longer term loans.
Who should get a bridge loan?
1. People who are determined to "snap up" a home they particularly like and know they will lose the opportunity if they wait for their old home to sell.
2. People who need to sell their old home before they can afford the minimum down payment for the loan they are qualified for, but who are having difficulty selling.
3. Those relocating for work or business, or who want to get the move completed before the new school year - in other words, time-sensitive relocation.
4. People downsizing to a smaller property or assisted living who expect to gain enough from the sale of their old home to cover the cost of their new one and therefore have no need for permanent financing (and often do not qualify).
5. It allows contingent offers to be turned into "real" offers faster.
FICO has no guidelines for bridge loans, so if you want one, make sure to choose the right mortgage company that offers favorable terms. First Savings Mortgage can work with you and your specific situation to find the right solution for you. There are people who most definitely benefit from bridge loans. If you need to close on your new home quickly for work or school reasons or simply to keep it from getting away it is worth getting a bridge loan. Good lenders use common sense to guide them on determining loan terms. (Also bear in mind - some lenders call these kinds of loans "swing" loans). If you are looking for a bridge loan, check out First Savings Mortgage website for information about whether a bridge loan is right for you and what alternatives you have to "bridge" the gap.