Bridge loans: What they are & how they work | – Chase News & Stories

April 26, 2022 By admin

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This article is for educational purposes only. JPMorgan Chase Bank N.A. does not offer this type of loan. Any information described in this article may vary by lender.
Thinking about selling your home while planning your next move? Doing both of these steps at once can be a delicate balance and may cause financial strain — especially if you, like many homebuyers, are planning on using the profit from selling your current home to buy your new one. Thankfully, a bridge loan can help ease your home buying journey.
A bridge loan is a short-term loan used to bridge the gap between buying a home and selling your previous one. Sometimes you want to buy before you sell, meaning you don’t have the profit from the sale to apply to your new home’s down payment. This can be a challenge if you were depending on that money to buy your new home. In the meantime, you can apply for a bridge loan to help finance a home purchase.
A bridge loan will help provide funds for your new home purchase if you do not have it readily available. The most common way to use a bridge loan is for closing costs. You can apply for a bridge loan with a lender. Although terms may vary, it’s standard to borrow a maximum 80 percent of both your home’s value and the value of the home you wish to buy.
To qualify for a bridge loan your lender will look at standard credentials like your debt-to-income ratio, how much home equity you have, your credit card score and possibly your household income. It helps if you’ve been a good mortgage candidate with your first home. If you do not have a decent amount of equity in your current home, it may be hard to qualify. If your lender determines that you are an ideal candidate, you may experience a faster approval process for a bridge loan than you did for a traditional mortgage.
The loan typically lasts about a year until you begin making repayments. It’s beneficial to structure it so you can use the money from the sale of your home to repay your bridge loan. There’s usually a final due date for when the loan needs to be paid back in its entirety. It’s important to work out the terms of repayment with your lender and make sure you’re clear on the steps going forward.
Applying for a bridge loan may be beneficial depending on your financial situation and where you are in the buying and selling process. Make sure to weigh your options, consider alternatives and talk with your Home Lending Advisor.

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