Individuals selling one home and buying (or building) another can be challenged with reconciling both events, especially in competitive environments. Bridge loans may be a effective solution to this problem. The information that follows on Franklin TN bridge loans – how bridge loans work will help you understand this financing program.
Franklin TN Bridge Loans – How Bridge Loans Work
Many sellers have equity in their existing real estate. There may be a gap in the date those funds are available for use if a new home must be settled prior to the existing property selling. Bridge loans are a solution to bridge that gap. It is a substitute for a home equity loan (since most banks will not approve home equity loans for homes on the market).
The approval process and criteria for bridge loans will be very different from traditional loans. Since bridge loans are for short periods of time, they are not normally sold to the secondary market and thus do not need to use the same provisions. FICO scores, debt-to-income ratios, and other approval criteria will differ from one lender to another. During the length of the bridge loan, the borrower will actually have two mortgages (one on the home listed for sale and one on the home purchased). Thus, qualifying to afford both mortgages is a consideration.
Weighing the Pros & Cons of Bridge Loans
Bridge loans allow real estate consumers to buy and list without the added stress of multiple contingencies and squeezing in same day closings. This can often provide additional negotiation power or put together transactions that may otherwise fall apart. It can also make the moving process less stressful by eliminating the need for short-term storage in same-day closing situations. On the other hand, not everyone may qualify for bridge loans. Bridge loans may also have more closing costs than home equity loans. Buyers and sellers should evaluate these advantages and disadvantages with the assistance of both real estate brokers and loan officers.
Whether you should obtain a bridge loan depends on your financial and buying and selling situation. A local mortgage company that provides bridge financing can give you more detailed information beyond the Franklin TN bridge loans – how bridge loans work mentioned in this blog.
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