bridge loan needs

meowser · Joined: 24 May 2007 Posts: 2

We are selling our first house in Colorado and buying a house where we currently live in Wisconsin. The close date is 8/10/07. The plan is to use the proceeds from the Colorado sale as a down payment and closing for the Wisconsin house, about $46,000. In the contingency the house doesn't sell by the closing date I would probably like to get a bridge loan. Does anyone have any experience with this? Would you get the main financing and bridge loan from the same bank? Are there any good references on who to use for a bridge loan

Our credit scores are mid to upper 700's.

Thx

m2c · Joined: 03 Aug 2005 Posts: 937

Bridge loan is not a big deal. Yes, it’s one way to supply the funds but a bigger kick is the ability to NOT count the debt in the ratios for the new purchase. If your income is high enough to cover a ton of debt, it may be more reasonable to add a HELOC to your current home to come up with necessary cash.

Bridge loans are really “loss leaders” so you’ll likely need to deal with the same company on both loans. CO and WI limits the field to lenders dealing in both states; likely a big, nationwide outfit.

Maybe Haplo will chime in with the product they offer. I can't help you since I'm a "little guy" and don't deal in either state.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Well, doing a HELOC on your current home is likely out. You have it listed for sale, and as far as I know, most companies won't let ya do that one.

Our bridge loan is a 12 month interest only line, I believe there is a 1% origination fee, and 90% of your value. I generally don't recommend it when you're in your position, because of the cost. However, if you *have* to do it in order to get your next loan closed, then obviously the cost is something that is less of an issue.

Overall, the rest of the deal is just like any other equity, and the costs are minimal. Likely there wouldn't be an appraisal, especially if you have a contract already. Overall, most of the time the costs for our equity loans are about $75-$100, unless there are any state specific taxes that need to be thrown in as well. Also, the 1% is based on the amount that you actually request. You *can* pay off your first mortgage, but you don't necessarily have to. This would lower the cost obviously, but you'd still have your debt counted in your ratio for the purchase of your new home.

Another option to consider would be to structure the purchase of your new home as a combination loan. If you are putting say, 25% down on your new home, get a loan that is 75% and one that is 25%, and then pay off the 25% when you receive the funds from CO. Obviously this will work with whatever values you actually want, but it allows your first mortgage to remain low without having a vastly different cost (assuming you qualify.) We've done some where they were 50/50. Another benefit for this is that if you are doing a line of credit, you have the line already so when you pay it you can simply access it when / if you need it.