Homeowners selling and purchasing simulataneously can face challenges with coordinating both transactions, particularly in competitive markets. Bridge loans are an alternative for homeowners facing this problem. The information below on Massachusetts bridge loans – overview of bridge loans will help you better evaluate this financing option.
Massachusetts Bridge Loans – Overview Of Bridge Loans
Many sellers have equity in their existing home. There may be a gap in when those funds are available if a real estate purchase must be completed prior to the existing real estate closing. Bridge loans are short term financing that allow individuals to bridge the gap. It is an alternative to a home equity loan (since many lenders do not allow home equity loans for properties currently marketed for sale).
The approval process and qualifications for bridge loans can be very different from traditional mortgages. Because bridge loans have shorter lengths of time, they are not normally sold to the secondary mortgage market and thus need not meet the same provisions. FICO scores, ratios, and other financial criteria will vary from one company to another. During the time frame of the bridge loan, the homeowner will actually maintain two home loans (one on the old property and one on the home purchased). Therefore, the borrower must be able to afford both.
Evaluating Bridge Loans
Bridge loans allow real estate consumers to buy and sell without the added stress of contingencies on both transactions and coordinating same day closings. This can often result in added negotiation leverage or facilitate deals that may otherwise fall apart. It can also make the moving coordination less stressful by removing the need for short-term storage in same-day closing scenarios. On the other hand, not everyone may qualify for bridge financing. They are also more expensive than home equity loans. Buyers and sellers should evaluate these factors with the assistance of both real estate agents and mortgage consultants.
The First Step
Whether you should request a bridge loan depends on your finances and real estate situation. A local lender that offers bridge financing can provide more comprehensive details beyond the Massachusetts bridge loans – overview of bridge loans above.