Understanding Bridge Loans: How They Work and Their Benefits
Discover what is a bridge loan and how does it work with A&A Funding! A bridge loan is a short-term financing option that helps you secure your dream home while waiting for your permanent mortgage approval. It provides quick access to equity, ensuring you don’t miss out on opportunities. With minimal underwriting requirements, these loans are designed for those needing fast, flexible solutions. Learn how a bridge loan can work for you and make your home-buying process smoother. Explore what is a bridge loan and how does it work now!
What is a bridge loan?
A bridge loan is a short term, limited underwrite loan that bridges the gap between buying a house and qualify & closing on a permanent mortgage. They have fewer underwriting requirements and are faster or more “streamlined” than a standard bank loan.
When to use a bridge loan?
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You found a house you want to buy, but haven’t sold your old house yet.
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Last-minute loan decline from a bank and you have no time to resubmit and get approved from another lender.
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No cash for a down payment but you have lots of equity in your current house. We may be able to use that equity for a “no cash down” scenario.
Pro's & Con's of a Bridge Loan
Pro's
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Little or no proof of income requirements
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No Appraisal required (although most lenders will still need some sort of value verification)
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No minimum FICO requirement
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No Debt-to-income ratio requirement
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Shorter wait times for underwriting, processing, and disclosure periods.
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No impounds added to the monthly payment
Con's
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Bridge loans will require a minimum number of payments prior to payoff (make sure you plan for that in your refinance strategy)
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These loans only have a 1-year term and can’t be extended, so make sure you have a well-planned “exit strategy” (plan to pay off the loan within 12 months)