Using a Bridge Loan to Buy While Selling
Looking to Buy While You Are Selling?
Buying a home is thrilling and exciting and terrifying all at once. Add in the fact that you haven’t sold your current home, and there are many more moving parts to your transaction. In a hot real estate market, sometimes you have to jump in and make an offer before you’re quite ready (or able) to sell your current home. If you have a hefty savings account and income sufficient to qualify for both of your mortgages, it might not be a problem, But for millions of homeowners, this scenario requires a different solution.
First and foremost, you can consider submitting an offer with a contingency. While this makes things easier on paper, it can affect the desirability of your offer - especially in afore-mentioned hot markets. Putting your current home up for sale first can mitigate some of this risk for the seller of your new home, but there will likely still be some sort of contingency in the event your home doesn’t sell or the sale falls through.
In order to put yourself in a position of strength at the negotiating table, you’ll want your house to be sold, and all contingencies from your buyers signed off prior to submitting your offer. Again, this is an ideal scenario, but not necessarily practical.
Enter the Bridge Loan:
A Bridge Loan is a short-term financing solution that allows you to finance two homes at once, temporarily. Once you sell your current home, you pay off the temporary bridge loan and are left with the one mortgage on your new home.
C&S California Capital offers two programs to secure your bridge financing:
The first is our Close with Confidence program, which is used when your current home is already pending sale, but not yet closed. The equity from your current home is used to fund the purchase of your new home. This option can have a term as long as 3 months and can exclude the payment on your departing residence from your overall qualifications on your new home if the home is in contract.
The second option is our Debt Inclusive program, which doesn’t require that your departing residence is sold - only that it is listed for sale. The term for this option can be as long as 4 months but includes all of the payments (current mortgage, bridge loan, new home) to be factored into your qualifications on your purchase.
Either way, you can get the equity out of your current home to facilitate your new home - without the seller looking askance at whether your offer is bonafide. Add a C&S approval letter and you’ve put yourself as close to a cash buyer as possible without having to actually have cash on hand for the purchase. This puts you in a much better negotiation position with the seller and takes a load of the worry out of the gymnastics required when buying and selling at the same time.
Be sure to talk to your C&S loan originator about what option might work for you, and put yourself in the driver's seat for your next home purchase.