Purchasing a new home while selling your existing residence can be a complicated financial move. If you are not able to afford the down payment for your new home without the proceeds from the sale of your current house or the closing on your new home is scheduled after the close of your old house, a bridge loan could help keep your transaction on track.
A Bridge Loan for Home Sellers allows you to unlock the equity in your current home to make a cash offer for your next residence and then use that equity as a down payment. It is not as common as other types of loans for buyers, but it can be a good option in hot housing markets or where you’re confident your current home will sell quickly.
Bridge Loan for Home Sellers: A Smart Solution for Buying First
However, mortgage lenders typically require a higher credit score and debt-to-income ratio for bridge loans because of the high risk involved in lending money to someone who is buying a home while selling another. Additionally, bridge loans typically have short repayment terms, which can put a strain on your finances if your old home doesn’t sell as expected or even at all.
Before you decide to take out a bridge loan, conduct a thorough review of your financial situation and carefully weigh your options, including other financing options. A good place to start is by talking with a qualified financial advisor.…