Individuals selling and purchasing at the same time may be challenged with reconciling both transactions, particularly in competitive environments. Bridge loans can be a effective solution to this dilemma. The information below on Newbury MA bridge loans – what are bridge loans will help you understand this financing option.
Newbury MA Bridge Loans – What Are Bridge Loans
Many homeowners have equity in their existing real estate. There may be a gap in when that the equity is available if a home purchase must be completed prior to the old property closes. Bridge loans are temporary loans that bridge the gap. It is an alternative to home equity loans (since most lenders do not allow home equity financing on homes already listed for sale).
The approval process and qualifications for bridge loans will be very different from traditional loans. Because bridge loans have shorter lengths of time, they are not typically submitted to the secondary market and as a result do not need to meet the same provisions. Credit scores, ratios, and other qualifying factors may differ among lenders. During the life of the bridge loan, the homeowner will essentially carry two mortgages (one on the existing home and one on the new property). Thus, qualifying to afford both loans is a consideration.
Evaluating Bridge Loans
Bridge loans enable homeowners to buy and sell without the use contingencies on both transactions and coordinating same day closings. This can often provide additional negotiation leverage or facilitate deals that may otherwise not work out. It also makes the moving process less stressful by removing the need for interim storage in same-day closing scenarios. On the other hand, not all homeowners qualify for bridge financing. They also have more closing costs than home equity loans. Individuals should weigh these pros and cons with the assistance of both real estate agents and loan officers.
The First Step
Whether you should obtain a bridge loan is dependent on your finances and buying and selling situation. A local lender that offers bridge financing can provide more in-depth information beyond the Newbury MA bridge loans – what are bridge loans shown above.