Individuals selling one property and buying (or building) another may face challenges with coordinating both events, especially in competitive environments. Bridge loans can be a useful solution to this dilemma. The information below on MA bridge loans – how bridge loans work will assist you with understanding this financing alternative.
MA 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 if a new home must be closed before the old real estate sells. Bridge loans are temporary loans that bridge that gap. It is a substitute for home equity loans (since many lenders do not approve home equity loans for properties on the market).
The underwriting process and criteria for bridge loans will be very different from typical mortgages. Because bridge loans are short-term, they are not normally submitted to the secondary market and therefore need not use the same standards. Minimum credit scores, debt-to-income ratios, and other qualifying factors may range among lenders. During the life of the bridge loan, the homeowner will essentially have two mortgages (one on the hoem listed for sale and one on the new property). Therefore, the borrower must be able to afford both.
Weighing the Pros & Cons of Bridge Loans
Bridge loans allow homeowners to buy and list without the use contingencies on both transactions and scheduling simultaneous closings. This can usually result in additional negotiation ability or facilitate transactions that can otherwise fall apart. It also makes the packing and moving coordination less cumbersome by removing the need for interim storage in same-day closing scenarios. On the other hand, not all borrowers qualify for bridge financing. They also have more fees than home equity financing. Individuals should evaluate these factors with the assistance of both real estate professionals and loan officers.
The First Step
Whether you should obtain a bridge loan is dependent on your financial and real estate goals. A local mortgage company that provides bridge loans can offer more comprehensive information beyond the MA bridge loans – how bridge loans work shown above.