How Do I Get A Bridge Loan?
Lenders set the bar to qualify for a bridge loan fairly high. Many conventional lenders such as banks and credit unions may not even offer bridge loans, typically preferring longer-term loans. Lenders that do offer such loans charge higher fees to compensate them for the shorter time frame in which to make money. Still, a bridge loan may be the only convenient option available when buyers need to make a down payment on a new home before selling their existing one.
Who can qualify?
Applicants for a bridge loan may feel that they are good candidates because they previously qualified for a conventional mortgage on their existing home. Now, they are just looking for a smaller loan to tide them over until they can sell that home and put the proceeds toward a new home. It sounds simple, but bridge-loan lenders have certain applicants in mind.
Without a pristine credit history and credit score, you probably will not qualify for a bridge loan. That’s because, if you are approved, you will be assuming more debt. Not only will you have a first mortgage but a bridge loan on top of it. That’s why these loans are typically reserved for borrowers with high credit scores. The higher the score, the greater likelihood you will be approved and the lower your interest rate will be.
Since lenders want to be sure that you are not taking on more debt than you can afford, they will look closely at your debt-to-income ratio. That figure will give the lender a good idea how much money you will be able to put toward your new loan after your other debts are paid.
You also are not likely to qualify unless you have substantial equity in your current home, at least 20 percent.
Tom BurchnellProduct Marketing Director
Tom Burchnell, Director of Digital Product Marketing for EasyKnock, holds an MBA & BBA in Marketing from University of Georgia and has 6 years of experience in real estate and finance. In his previous work, he spent time working with one of the largest direct lenders in the SouthEast.