Funding your next house may not come easy—fortunately, specific loans exist for people wishing to do just that.
Arizona Bridge Loans have a variety of names. From “swing loans” to “wraps” to being referred to as “bridging the gap,” they all mean the same thing: borrowing using the down payment on your house to purchase the next. They are used when you want to make a purchase before selling your current home, and oftentimes to get out of contingencies in contracts that you must sell your current home first. The word “bridge” is the transitional metaphor of moving from one home to the next.
The benefits of Arizona Bridge Loans include the freedom of searching, buying and selling your homes, with no transition period between, allowing for the ability to move in when ready with no temporary living spaces. Other common scenarios include using these loans in scenarios of small renovations and relocations across cities. People avoiding loan contingencies are usually interested in this type of loan, while lenders are generally interested in them for their high interest rates and short-term, low-risk repayment.
How to Know if “Bridging the Gap” is Right for You
If this loan interests you, qualifying will require a great credit score and a low debt-to-income ratio. Qualifying for this loan means that you will own two properties—which means paying two mortgages. Additionally, these types of loans are short-term loans, usually being paid off in 6 to 12 months, and carry higher interest rates. Rates vary from lender to lender, but they are usually 2% higher than the market. They will also be further affected by the home’s loan-to-value LTV ratio and your personal credit history. These factors coupled with the need you’ll have of selling your house are definitely things to consider before making any fast decisions. Understanding the current housing market and how your home will fare compared to other listings will be important and cause you less stress. Sometimes loan extensions can be provided if the house isn’t selling, but it’s important to be aware of these unguaranteed factors ahead of time.
Moving Forward and Alternative Options
If Arizona Bridge Loans are right for you, finding a possible lender can be done at your local bank or credit union. If they are not the right option for you, alternative routes such as home equity loans or a 401k are other options. High credit and income is required for home equity loans, but they are common suggestions when Arizona Bridge Loans aren’t the answer. Home equity loans essentially take a second mortgage on your home that can then be used for a new loan. Personal loans are also alternatives that generally have lower interest rates. It’s not uncommon for personal loans to be small or paired with other types of loans. Evaluating all your options and understanding your long and short term goals will help you determine the decision that’s best for you. Whether or not these loans are the answer, other options are definitely able to be sought so that you can finally manage your dream property.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.