When we want to buy a new home and also need to sell our current home, we try to make it so that the escrows will close simultaneously. Sometimes, for various and sundry reasons, that just doesn’t happen. “Now what?” you might ask. Maybe you are one of the lucky ones that doesn’t need the income from the first home to buy the second home. But, for those of us who do, there is the bridge loan.
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A bridge loan, also known as a gap financing, is a loan you obtain to cover the short term between the closing of your current home and your new home. The easiest way to do this would be a home equity line of credit (HELOC) or refinancing your current home to cover the down payment and closing costs on your new home. This is also called a wrap loan.
Other options would be a personal loan, a line of credit, or loan from a family. These are all ways to bridge the gap between a sale and a purchase.
Do You Really Need a Bridge Loan or Are There Other Options?
With all of the new financing options available today to “reboot” the economy, do your research on transactional lending. Are you eligible as a first-time homebuyer? Can you negotiate smaller earnest money deposits or a lower down payment?
Transactional lenders are now providing gap loans with 100% financing, no credit check, and no appraisals for those that already have qualified buyers ready to take over their property. This has brought back true no-money down real estate investing.