Understanding the purpose of Arizona bridge loans can offer home buyers many options if their current home is still on the market. These temporary loans can help to coordinate your finances between buying a new home and selling your current one.
There are many events that must fall into place when you are in search of a new home and wish to sell your current home. And very rarely does everything work on the perfect timeline for you to sell your house before you need to purchase the new house. But buyers can use Arizona bridge loans to secure their dream home while waiting for their current home to sell.
What you are really doing with a bridge loan is borrowing the money for the down payment on your new home which would have been funded via the sale of your current home. Most home buyers, other than first-time buyers, rely on the equity they have in their current home to make the sizable down payment on their new home. So in a sense, Arizona bridge loans are designed to be short-term loans.
The qualifications for Arizona bridge loans are not the same as a standard mortgage. It’s assumed that if you have a current mortgage on your home then you have decent credit. What the lender is more concerned with is your ability to make both mortgage payments until your first home is sold. The lender will evaluate your income and the total of the two mortgage payments to decide if you are able to carry both mortgages. If the numbers work out then most lenders will fund requests for Arizona bridge loans.
The Cost of A Bridge Loan
Rates and terms can vary depending on the lender. In many cases, the lender will offer borrowers a payment schedule with the first payment being due several months after the loan is funded. This allows the borrower time to sell his or her current home without having to make payments on the bridge loan for a few months. But there is interest accruing from the day that the loan is funded. Then the borrower pays that interest when the loan is paid off. The goal is to sell the home quickly and only be required to pay a month or two of interest but in a slow market, the bridge loan could extend for a longer period of time which would require the borrower to make payments.
Risks and Rewards
The greatest reward offered by a bridge loan is that buyers are able to purchase a new home without having to wait for their current home to sell. That is important if the market is very competitive or if the inventory is very limited. The drawback is that the borrower will be paying two mortgages until their old house sells. And if the house does not sell soon after the new home is purchased, borrowers could be facing two mortgage payments plus the payment on the bridge loan each month. The result could be a very tight budget until the original home is sold.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
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.