Arizona bridge loans are gaining in popularity as a short term loan
options. Like any loan, there are certain inherent risks and benefits. Knowing
how to analyze your loan will help you decide if it is a good option for you.
A bridge loan can be the
missing piece of your home
Arizona bridge loans are short term loans used when a borrower who has not sold his
current home wants to purchase a new home. These loans work to bridge the gap
when the borrower plans to use proceeds from the original home as the down payment
on his new home. The bridge loan is secured to the original home, the one
that’s on the market. The funds from that loan are used as the down payment for
the mortgage on the new home.
There are no strict guidelines when it comes to Arizona bridge loans so credit score
and debt to income ratio are not usually factors that will automatically
disqualify you. This is good news for borrowers with less than stellar credit
or who may have a high debt to income ratio once they purchase their new home.
Instead, bridge loans are based on a few different factors, including how
likely it is that you will sell your current home quickly, and whether or not
you can make both mortgage payments for a short time if it becomes necessary.
If you default on a bridge loan, the lender has recourse to get their money
back using the property you have on the market because it is the one that
secured the loan.
The Risks and Benefits of Arizona Bridge Loans
There are several risks that are associated with bridge
loans. Like any loan, they are not entirely safe and can lead to some negative
consequences if you don’t fully evaluate their terms, conditions, and rates.
First and foremost, Arizona bridge loans
have fees associated with them. Generally there is an administration fee of
about $750, an appraisal feel (for your current home) of about $350. Once
notary fees, wire fees, origination fees, and any other lender fees are added
in, a bridge loan will end up costing the borrower about $2,000 to obtain. This
may seem like a lot, but if is the difference between buying your dream home or
losing out, many borrowers find that the fees are more than worth it.
Especially since it is much easier to come up with two grand for a bridge loan
than it is to find $20,000 for a down payment if your current home has not
Another risk to Arizona
bridge loans is high interest rates. Most short term loans are inherently
more risky for the lender. You will pay extra for that risk meaning you will
have a higher interest rate. Interest rates fluctuate based on the prime rate
and how much you need to borrow, but typically speaking the interest rate on
bridge loans is usually higher than a traditional home mortgage. You can avoid
paying high interest rates by selling your home quickly and paying back the
loan as soon as possible.
Along with the risks, there are also several benefits to Arizona bridge loans. Many loans offer
terms that allow you to skip the first few months of payments. If you can sell
your home during this time, you can avoid paying any interest at all on the
loan. In addition, you can use extra proceeds from the loan to do remodel work
on your new home and put your own personal stamp on it.
Also, bridge loans allow you to put your current home on
the market quickly and without restrictions. Potential buyers will not need to
schedule showings because the home will be vacant. A vacant home is easier to
show and usually sells more quickly due to ease of access. You can also look
into staging your home to give you an extra advantage. And without your family
living there, it will be easier for new buyers to picture themselves living in
Bridge loans are also usually fairly easy to qualify for
and have flexible underwriting guidelines. This makes them an ideal loan for
someone who needs cash for their new home fast.
Call an Arizona
mortgage broker or private lender to get started on a bridge loan today.
Once you are settled in your new home, you will be happy
that you chose to use Arizona bridge
loans to help you get cash fast and with little hassle.
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027