You’re ready to take the next step with your real estate investments, either for your next home or another type of property.
But you’re unsure how all of the pieces will fall into place, between selling your current property, getting access to cash, and being able to make a move to buy your next property quickly enough.
If you’re facing a possible transition like this, there are many complicated aspects to manage. Financing the purchase doesn’t have to be one of them. Bridge loans offer a quick and simple solution.
Find out more about bridge loan qualifications to know whether it might be the solution you’ve wanted.
Should you get a bridge loan?
Consider all of your options for financing, such as a home equity loan or personal loan. There may be solutions that you didn’t know existed.
If you’re looking to buy a home or property but don’t have immediate access to the cash to do so, you may want a bridge loan.
Bridge loans provide short-term financing commonly used for transitional 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.
Bridge loans also apply to construction projects, renovation, and can cover a full purchase or even just a down payment amount for a new property.
To decide if a bridge loan is right for you, learn the qualification requirements to understand whether your scenario might apply.
What’s your loan scenario?
How do bridge loans work?
If you have an existing house or property but are looking to sell it to finance the purchase of another property, this may seem complicated.
In an ideal world, you would sell your existing property first and use that money as a down payment on your next property. But this can make the transitional period between properties stressful and in some cases, it just isn’t realistic.
Bridge loans offer many benefits, including financing to purchase new property when you’re not able to sell your current property as quickly.
So what are your options 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.
Bridge loans may be helpful in scenarios including:
- Homeowners who need the immediate cash to put a down payment on a new home, while waiting for their current home to sell. In some cases, this can even help avoid private mortgage insurance (PMI) on the new house.
- Real estate investors to use bridge loans to cover the gap between purchasing one property without having to wait for the sale of another.
- Developers or homeowners looking to build a new property while waiting for a current one to sell.
In any case, when a property 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.
What are the qualifications for a bridge loan?
To qualify for a bridge loan, the process will often differ depending on the lender you work with.
With common loans, traditional lenders and banks will require the borrower to meet standard qualification requirements, primarily based on your personal assets, debts, and income.
Because bridge loans are seen as higher risks to traditional lenders, they may not offer them to consumers or may have even stricter requirements to safeguard their financing.
You may have to show that you can afford to pay the mortgage on your previous property, the mortgage on a new property, and the bridge loan, which many people can’t do.
At the very least, these lenders will likely require excellent credit, a low debt to income ratio, and often 20% equity in your current property.
Flexible requirements with hard money lenders
The primary qualifier for bridge loans is property value.
In contrast to traditional lenders, a hard money lender will focus more on the merit of the deal and less on your personal finances to approve a bridge loan.
They know that every scenario is unique but that each one also has the potential to be a great investment.
Hard money lenders consider the value of your current and potential properties, as well as your plan to use and pay off the bridge loan.
They apply years of industry experience in each scenario and want to work with you on your financing goals.
Hard money lenders often primarily need to understand the stability of the investment. To help with this, provide details of your plan to purchase the property and repay the bridge loan.
Private lenders may also consider factors such as the loan-to-value ratio and some of your financial information such as credit score and bank statements, but no income verification is needed.
These are equity based real estate loans and Marquee Funding Group has unlimited capital available for bridge loan clients that fit our criteria.
How do you plan to pay off a bridge loan?
Bridge loan lenders like Marquee Funding Group can lend up to 70% of the combined value of two, three, or more existing properties while keeping a current conventional mortgage in place.
This means, a bridge loan will be the primary loan on the new purchase but able to take a first, second, or third position on other current properties.
By looking at both or multiple properties as collateral for a bridge loan, you can get a short-term loan to buy a property with plenty of time to move and sell the current property, known as your “departing” property.
Sometimes bridge loans can provide more than 100% financing towards a new purchase.
During the transition, the bridge loan will allow interest only payments.
When the departing property sells, you then need to reduce the principal balance of the bridge loan to 70% of the value of the newly acquired property for the hard money lender to release the lien from the departing property.
Then when the departing property sells and the bridge loan balance is reduced, you can get a more traditional bank loan with longer term mortgage payments, which will also pay off the bridge loan.
Where can you find a bridge loan?
As we’ve discussed, you may find that a hard money lender is the best place to start to discuss your options for a bridge loan, as they offer more flexible and accessible loan qualifications.
Marquee Funding Group is a hard money, or private money lender, with an experienced team of savvy real estate investors. Because we base our loans on common sense and experience, we’re able to fund all types of loans for consumers and businesses, including bridge loans.
If you’re struggling to reach your real estate financing goals because of complex qualification requirements, we can free up your options for funding your next purchase and transitioning from your current property.
We strive to make financing more accessible to you, beyond what traditional institutions can offer.
Marquee Funding Group provides the following benefits for those looking for a bridge loan:
- No income documentation for bridge loans
- Immediate review of your loan scenario
- Same-day approvals
- Funding in as fast as seven days
- Quick, in-house loan application, document request, and underwriting
- Loan amounts from $50,000 to $20 million
- Commercial or residential bridge loan options
Submit your loan scenario today and we’ll begin reviewing it immediately.
We’re here to help you make your next move quickly and simply so you can make a bridge loan work for you.