Need a quick loan to purchase a new home before you sell your current one? Are you an investor waiting between the purchase of one property and the sale of another? In this in-between state of watchful waiting, you have loan options to help you move forward.
Bridge loans offer the opportunity to keep things moving when you otherwise would be at an uncomfortable standstill. Especially if your purchases are time-sensitive, these fast, temporary loans “bridge the gap” between buying and selling.
If it seems too good to be true, it could be — with your current mortgage lender. High interest rates and large origination fees could hold you back. Plus, your lender may require you to have excellent credit. For a common-sense approach to your unique case, you could use a private money lender for a bridge loan.
Read on to find out how bridge loans work, when to use one, and how to work with a hard money lender to get one.
What is a bridge loan?
Ideally, the goal is to sell a property to purchase the next one. But in many cases this doesn’t work out the way we might hope.
A bridge loan, however, provides quick, short-term funds to purchase a new house while waiting for your current house to sell, or fast cash while you’re waiting for more long-term financing.
Traditional lenders cannot wrap their heads around bridge loans or the qualification process.
Private money lenders simplify the process
Traditional lenders usually can’t approve you for a loan on your purchase property while you still have a mortgage on your departing primary residence. That’s where we come in.
Private money, or hard money lenders, make getting a bridge loan smoother. These lenders provide loans based on common sense rather than strict documentation. No income documentation is required with a private lender when applying for a bridge loan.
They are primarily focused on the equity and asset value of the property.
When to use a bridge loan
Both businesses and individuals can use bridge loans for real estate transactions.
Gap financing in business
Businesses and corporations might use bridge loans to cover immediate expenses while they wait for long-term financing. This could include covering rent and utility costs, or the costs of purchasing a new building or property.
Covering costs for individual buyers
Families might use a bridge loan to build or purchase a new home while they wait to sell their current home.
If you’re having trouble selling your home or need to live there while your new home is being built or purchased, bridge loans cover the gap and offer a security net during the in-between period.
Bridge loan requirements: traditional vs private lenders
Traditional mortgage lenders
With a traditional lender, the terms, costs, and conditions of bridge loans varies. Sometimes you are required to pay off your current property’s first mortgage at closing. Others allow you to accrue the new debt with the old. You may need to make monthly payments, or you may need upfront or end-of-term payments.
Since these loans can be risky for traditional lenders, they will take their own protective measures. This could mean foreclosing on your current property if you can’t meet their financial requirements after the loan is approved.
You also might be required to have 20% equity in your current home in order to use those funds. That on top of the credit and Debt-to-Income (DTI) ratio requirements can make getting a loan feel impossible.
Private money lenders
With a hard money lender, the process to get a bridge loan is much simpler. Private money lenders allow more freedom and flexibility by looking at your unique situation and making quick moves based on their years of experience.
Private lenders such as Marquee Funding Group offer the following benefits:
- Common-sense underwriting
- Same-day approvals
- Closing in as fast as seven days
- Loan amounts from $50,000 to $20 million
- No income documentation for bridge loans
Using a private money lender to get a bridge loan
Where you get your loan is important. Just as it’s important to choose which traditional institution to get a mortgage from, choose your private money lender wisely. The experts at Marquee Funding Group want to build real relationships to fund your current and future projects.
Our lending decisions are based on the benefits for you and the merits of each deal. If you tried to get a bridge loan with your current lender and were unable to, call us and we will review it. We take on anything from simple requests, to challenging or unusual real estate transactions others won’t do.
Everything is done in-house, including the underwriting, servicing, and processing. This makes our process as simple and smooth as possible. We want everything we do to be in your best interest.