When the lack of a buyer hinders your ability to move, a bridge loan could help you acquire a new home while you sell your existing one. Applying for private lenders for real estate can be easy once you understand the steps you need to take before finding a lender.
Assess the Market Value of Your Property
Do you know how much your house is worth? A property may sit on the open market if its seller priced it too high. A professional appraisal provides an assessment of your property’s value. It can help you to determine how much you could ask for your home and still expect it to sell within a year. The value provided by an appraiser can be used to apply for a bridge loan through hard money lenders.
Unlike an appraisal, however, real estate comps of other properties recently sold in your neighborhood reveal a home’s final sale price. They compare an owner’s original asking price to the home’s final sale price. This can give you an idea of how buyers in your neighborhood are planning to negotiate for a lower price.
Determine the Worth of Your Equity and Other Assets
Bridge loans are designed to give you financing for up to a year so that you can buy a new home while your current one is still listed on the market. The idea of a short-term loan is to pay it off with the proceeds of your current home’s sale. The amount financed, however, may require some equity in your property or other valuable assets, such as a boat or retirement portfolio.
If you have a mortgage on your existing home, you could use that as a starting point to determine how much equity you have. After receiving an appraisal for your property and looking at some neighboring comps, subtract the balance of your mortgage from the price you could reasonably expect to sell your house. Some California hard money lenders may require showing as little as 20% in equity value when applying for a bridge loan.
Find the Property You Wish To Purchase
Because a bridge loan serves as a means to “bridge” a gap while in between two properties, you may need to first find the home you wish to purchase. You can begin searching for your new home online or asking local realtors about their available listings.
Once you find your ideal home, you may need to make an offer to purchase it. Some sellers, however, may not accept your offer without first seeing a check for an earnest deposit or a down payment. A bridge loan could help you overcome this typical buyer’s dilemma because it could provide you with a down payment based on the equity value of your home or assets.
Apply For a Bridge Loan
Some hard money lenders may need to see you’ve received an offer from a buyer interested in your existing home. You may also be required to show that you’re ready to enter into a contract with the seller of the home you plan on buying. To “bridge the gap” between two homes may require some extra work, but it could enable you to close two sales quickly even if you don’t have a stellar credit score.