In an uncertain or competitive housing market, sometimes borrowers need extra support to secure the home of their dreams.
Whether you have to purchase a new home before you’re able to sell your current one, you want to put 20% down to avoid private mortgage insurance (PMI), or you need to make a fast move, a bridge loan can help.
Private money lenders can offer the best bridge loan options for a range of unique lending scenarios. Let’s dig into these options.
Why is it called a bridge loan?
Bridge loans are known to “bridge the gap” between the sale and purchase of a property, or to cover the gap between the immediate need for cash and the ability to secure permanent financing later.
That’s why bridge loans are also called swing loans or gap financing. They are a source of short-term financing that uses your current property as collateral.
Bridge financing can be used for a variety of consumer or business purposes to help borrowers move forward with a deal when they otherwise wouldn’t be able to.
Traditional lenders such as banks and credit unions may offer bridge loans, but it can be difficult to qualify because some lenders consider them higher-risk loans.
Hard money lenders, such as private individuals, investors, or funding groups, are much more flexible with bridge financing. They structure bridge loans frequently and can help borrowers meet their financing goals much faster.
What’s your loan scenario?
How does a bridge loan work?
You’ll have to qualify and apply for a bridge loan, much like any other loan type, but swing loans work best when you have a lender who’s an expert in structuring these types of loans.
Traditional lenders require specific credit score, income, equity, and debt-to-income (DTI) figures.
Hard money lenders want to hear your business plan and exit strategy.
They may require you to back up this info with some bank statements or asset statements, but oftentimes they can make a decision over a quick phone call.
How Marquee Funding Group structures bridge loans
Marquee Funding Group is a team of real estate investors and loan originators who structure a wide range of hard money loans for consumer and business purposes.
For a bridge loan, Marquee can lend up to 70% of the combined value of any two, three, or more properties while keeping existing conventional loans in place.
We can take a first, second, or third position on the current home while taking a first position on the new home purchase.
Using both properties as collateral for one loan, we can give borrowers a short-term loan to purchase their new home and move in, with enough time to sell the departing residence.
When the departing residence sells, the borrower can then either pay off the loan in full or reduce the loan’s principal balance to 70% or less of the value of the newly acquired property so we can release the lien from the borrower’s departing residence.
Once this property is sold, the borrower will either be debt-free or the loan balance will be reduced so that they are in a position to get a regular bank loan to pay off the balance.
What is a bridge loan example?
Bridge loans can be used in many different scenarios. Let’s look at some of the best bridge loan examples.
Purchasing a new property before you’re able to sell your current one
While it may be ideal for you to sell your current home first so you can use those funds to purchase your new one, this doesn’t always work out as smoothly as one might hope.
Additionally, it’s sometimes necessary to purchase a new home first if you need to find a property as soon as possible in a new town for a job, or if you need a place to live while you search for a new home.
If you find yourself in any of these scenarios, you can use a bridge loan to give you the instant cash flow you need to secure that new property before you sell your current home.
Putting down 20% to avoid paying PMI
A 20% down payment eliminates the need to pay private mortgage insurance.
Many borrowers can’t afford to put 20% down — especially if they are waiting for their current home to sell — but they want to help themselves out by eliminating mortgage insurance and starting off with 20% equity in the home.
A bridge loan can give you the amount you need to make your ideal down payment.
Making a contingency-free offer on a home
In competitive markets, including a seller’s market, contingency-free offers are a no-go.
Sellers simply don’t want to mess around with these types of offers, especially when they have a pile of other, potentially better offers on the table.
Put yourself ahead of the competition by eliminating your sales contingency and making it clear to the seller that you have the cash in hand, ready to go.
Other bridge loan examples
Bridge loans also can be used when your closing date for the sale of your current home is scheduled after the closing for your new home, to cover the down payment and closing costs.
Bridge loans also are an essential tool in real estate investment and business purposes to keep deals moving along and to provide immediate funds for large purchases or expenses.
Is a bridge loan easy to get?
Bridge loans typically are not easy to get with a bank or other traditional lender.
In fact, many either don’t offer this type of loan or will require excellent credit and other strict qualifications.
Hard money lenders are proud to fill this gap in the industry. We understand the urgency our borrowers have for immediate financing to get their deals done and move ahead with life.
Bridge loans have an outdated reputation for being inaccessible to many borrowers, and having high-interest rates. Hard money lenders make bridge loans accessible to many types of borrowers.
Interest rates may be higher with a bridge loan than with a traditional mortgage, but the financing is meant to be a short term of six months to a year. This time frame gives borrowers enough time to get their deals done and secure a source of long-term financing.
Reach out to Marquee Funding Group today, if you’re interested in connecting with reputable, honest, transparent bridge loan lenders who want to be your true investment partner.
We offer the following loan benefits and options to borrowers:
- Same-day approvals
- Closing in as fast as seven days
- Loan amounts from $50,000 to $20 million
- Loan-to-value up to 70%, deal-specific
- Purchase money loans
- Rate-and-term refinance and cash-out refinance
- Owner-occupied and non-owner-occupied consumer or business purpose loans
- Single family, multi-family, commercial, industrial, and land loans
- Construction loans, including ground-up, fix-and-flip, fix-and-occupy, and value-add
How can private lenders offer these benefits to borrowers? It’s because we are not required to follow the same rules and regulations as traditional lenders. We set our own borrowing guidelines that make the most sense for us and our borrowers.
Submit your bridge loan scenario today for quick review by our experienced team. We look forward to structuring the best bridge loan for your unique lending situation.
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