EP.22 - How to Buy Your Dream Home BEFORE Selling Your Current House | Bridge Loans Explained

You're about to lose your dream home because you haven't sold your current one. But what if there's a way to buy now and sell later?

In this episode, Ryan Marks breaks down exactly how bridge loans work and how homeowners can use them to upgrade without the pressure of selling first.

WHAT IS A BRIDGE LOAN?
A bridge loan is a short-term loan that bridges the gap between selling your current home and buying your new one. It lets you:

HOW BRIDGE LOANS WORK:
The lender calculates your loan based on:

• Value of your current home
• Value of your new home
• Outstanding loan balance on current property
• Maximum loan-to-value (LTV) is typically 75%

KEY QUESTIONS TO ASK:
1. What's my maximum loan amount based on my equity?
2. What are the rates and fees?
3. How long is the bridge period?
4. What happens if my house doesn't sell?
5. Can I get both properties at the same time?

TIMESTAMPS:
0:00 - Hook: You're about to lose your dream home...
0:30 - What is a Bridge Loan? (Definition)
2:15 - How Bridge Loans Work (The Math)
4:00 - Bridge Loan Example: $1M → $2M Property
6:30 - Maximum Loan-to-Value (75% Rule)
8:00 - Who Can Get a Bridge Loan (Not Just Investors)
10:00 - Key Questions to Ask Your Lender
12:00 - When to Use a Bridge Loan (When it Makes Sense)
14:00 - Final Tips & Call to Action

🎯 READY TO EXPLORE BRIDGE FINANCING?
Schedule a free consultation with Ryan Marks to discuss your specific situation and see if a bridge loan is right for you. Visit www.seimortgage.com

Ryan Marks is a mortgage professional specializing in bridge loans, creative financing, and helping homeowners navigate the buying/selling process. NMLS #519138

#BridgeLoan #HomeBuying #RealEstateTips #MortgageAdvice #BuyAHome #DreamHome #Homeowner #FirstTimeHomeBuyer #HowToBuyAHouse #MortgageEducation #HomesForSale #RealEstateAdvice #SeIMortgage

DISCLAIMER — Ryan Marks is a Licensed Mortgage Loan Originator (NMLS #519138) operating under The Turkey Foundation, Inc. (NMLS #236669), an Equal Housing Lender. Ryan conducts mortgage origination under his DBA, The Everyday Lending Group. SEI Mortgage is an educational brand only. It is not a mortgage lender, does not issue pre-approvals or loan estimates, and does not extend credit in any form. All information provided in this podcast is for educational and informational purposes only. Nothing in this episode should be interpreted as legal, financial, tax, or real estate advice, a commitment to lend, or an offer, quote, or guarantee of loan terms. Loan guidelines, program availability, rates, and qualification methods, especially for Non-QM programs — can change at any time. 

Transcript

SPEAKER_00 0:00

You're about to lose your dream home because you haven't sold your current one, but what if there's a way to buy now and sell later? On today's episode, we're going to cover what is a bridge loan, how to use a bridge loan, and when to use a bridge loan. Let's get into it. On today's episode, you can actually be a regular wage earner or self-employed, and the bridge loan product will apply to you just the same. So, what exactly is a bridge loan? A bridge loan is a short-term loan that essentially bridges the gap between you selling your current residence and buying the new one in order to utilize the equity in your existing property so you can purchase that dream home and level up and not have to worry about selling your departing residence. So, how exactly does a bridge loan work? You're going to take the value of your current property plus the value of the new home that you're going to buy, and any existing loan that is on the current property divided by that combined value will give you a final loan to value that you typically cannot exceed 75%. So, for example, let's say you own a property for$1 million and you're looking to level up to a property of$2 million and you don't owe anything on the current property. It is free and clear. So at$3 million, you would have a max loan amount available of$2,250,000. That is the best case scenario, but for most of us, we have an outstanding loan on our current residence. So you have to deduct whatever that current loan balance is from that max 75% loan to value, and that's the amount that you can technically put down on the property. And does it pencil out where you have to come in with no cash whatsoever while you wait to sell your current departing residence? So here's some examples of how a bridge loan might work for your scenario. If you're looking to purchase a property before selling your existing property and you do not want to go contingent on the sale of your departing residence, this could give you a much stronger offer when the seller's reviewing your property in order to accept your offer versus having to wait or be guaranteed that your other property is going to sell prior to the deal going through on the new home you're looking to buy. Or let's say you're relocating, you found another job, or you've decided to relocate to another state and you need to move quickly in order to purchase another property so you're not homeless when you get there, but you don't have time to actively market your existing property in order to sell it and take those proceeds to buy your next home. Or simply put, you found your dream home, you have to make an offer fast before somebody else snatches up that home that you've been waiting to find, and you don't have time to properly market your departing residence and sell it in order to access that equity. So what are the pros and cons of using a bridge loan? The pros are number one, the bridge loan has the ability to use no debt-to-income ratios. So what that means is if you have access to cash, let's say, for example, you're going to take a home equity line of credit out on your existing property and use that money towards the down payment in order to buy your new home before selling your existing property. Guess what? You have to qualify for the debt-to-income ratios, not only on the new property, but also on the existing financing of that current property and whatever the payment's going to be on that home equity line of credit that you use for the down payment on your new home. So if you can't qualify to meet the debt to income ratios, it's very difficult for you to secure financing while you wait to sell that property using a HELOC method. However, a lot of the bridge loan products that we offer use no debt to income ratios whatsoever. More importantly, they also offer deferred payments. So it's a lot like a home equity line of credit where the investor is going to allow you to access the cash in your existing home in order to put the money down on the new loan, but you're going to essentially have one loan on two properties. Remember, it is short-term financing, typically six to 12 months. So you want to make sure that you have an exit strategy as soon as you sell your departing residence in order to pay off that bridge loan and go into whatever your long-term financing is for the remaining house that you now owe. But in the meantime, you have access to deferred payments where you don't have to make any payments on that existing bridge loan while you wait to sell your property. And as soon as that property is sold and you actually have those proceeds available to pay off that bridge loan, you're just going to add on however many months you utilize that bridge loan. Typically, it is an interest-only payment as well. So those are some of the major pros. Some of the cons of a bridge loan are it is not cheap. I hate to break it to you, but because financing is short term, just like other loan products we've covered in previous episodes, like hard money, the servicer is not going to make any money on this loan because your intention is to pay it off as quickly as possible. So you can expect to pay anywhere from one to three points on the amount of the total bridge loan financing, in addition to higher interest rates. Now, again, if you're utilizing the deferred financing on an interest-only payment, that's going to help offset some of that all-in cost. But the main reason why you would use a bridge loan is because it is an immediate vehicle in order for you to secure your upleg or your new property prior to selling your departing residence. So if you're thinking about making the move and possibly considering a bridge loan, we'd love the opportunity to connect with you and crunch the numbers. You can get in touch with us using our contact information below or drop a question in the comments below, tag it bridge, and I will reply to every single question. Thank you so much again for being a part of the community and remember to let your income work smarter, not harder. We'll see you on the next one.