Bridge Loans just may be your perfect solution to stay competitive in this market as a buyer!

One of the biggest challenges you may be facing is wanting to buy, but needing to sell – and a competitive market where any type of contingency can lead to you being passed over as a potential buyer! But guess what, we have a GREAT solution that is helping out a lot of people right now in this market.

It’s called a Bridge Loan! Maybe you have heard of this. If not, let me explain exactly what a bridge loan is, how it works and what it can do for you.

So what is a Bridge Loan? Well, it is a way for you to purchase a new home without selling your current one. And here is the technicality of how it all works!

The formula for qualifying for this is as follows:

Add your Current Loan amount + the New Purchase Price of the home you want to buy, and then divide that by your Home’s  Current Value + that New Purchase Price and see what the percentage comes out to.  If it is less than 85%, you’re good and this will definitely work for you and benefit you greatly!

If that seems complicated, let’s break it down by looking at an actual real world example. HERE WE GO!

Sarah and John’s currently owe $285,000 on their home, and they want to buy a  new home that is $600,000. First, you add those two numbers together, which gives you $885,000.

Then, we take Sarah and John’s current home value (which is $500,000) and add that to the purchase price of the home they’re looking to buy (again, $600K), and together that’s $1.1 million dollars.

Last, we are going to divide that $885,000 (the amount they owe + cost of home they want to buy) by the $1,100,000 (Which was their home’s current value + price of home they want to buy), and that comes out to 80%! So for Sarah and John, this is a viable, great option (that final number just has to be less than 85%).  

As long as that final number is 85% or less, what that means is you can purchase a new home with 100 PERCENT financing and be NON-CONTINGENT! Which, again, is extremely important right now in this market and why this is such a perfect solution for so many people right now.

Why do you want to be “non-contingent?” Well, when a buyer makes a “contingent” offer on a house, they’re essentially saying, “I’d like to purchase the property, but I want to make sure some things are finalized on my end before closing the sale.” In this market, that can make you a NO-GO to sellers! There are a few primary types of contingencies you might have had to put on a contract before, but if you get a Bridge Loan then you no longer have these stipulations holding you back. The main types of contingencies we see are typically 1) Inspection contingency, 2) Appraisal contingency, 3) Loan contingency, 4) Home Sale contingency. But now, you’re free from all that with this solution and a much more attractive offer!

Some sellers will even qualify for TWO homes and then in that case, the lender can help pull equity out of your home (Home Equity Line of Credit) while your current one is being listed for sale or sold after the new purchase. This program is extremely beneficial in this market. 

If you have any additional questions on the program and how it works or could apply to you, give us a call. We would be happy to walk you through the process and then refer you over to our preferred lender who can see this all executed for you! All resulting in you ending up in your dream home, faster and easier without the headache of contingencies.

Thanks again for always considering M&D for your real estate needs. We are always happy to provide you with any real estate or market advice, a free home valuation if you’re considering selling, and/or setting up a search alert for you if you’re looking to buy. Just give us a call or shoot one of our agents an e-mail anytime, and we’ll get right on getting you where you need to go!