Bridge Loan
Many home owners have had dilemmas when selling their homes and downsizing to smaller homes:
They will need to get the proceeds from the sale to put down as the down payment for the new purchase. However, this will leave them with no place to live for that period of time. Worse, should they find a house they really like before their own house is sold, they will have to put contingencies on the offers subject to the completion of their house being sold. In today’s seller’s market, with such contingencies in place, their offers are often not even going to be looked at, much less considered.
A client of mine ran into exactly this situation: She was downsizing and selling her home. Somehow, she found a new dream home before her house was sold. She came to me through a referral, I helped her to get a bridge loan which takes out equity from her current home as down payment, then lend her money to purchase that dream home she fell in love with. The loan she received covered 100% of the new purchase price, she ended up only paying a few thousand dollars for closing cost.
After a while, she sold her home, she immediately paid off large portion of the bridge loan, and refinanced the remaining balance of the loan into a 30 years fix low cost loan.
By taking the bridge loan, not only did she purchased her dream home, but also avoided moving twice, which would have been huge headache for her.
A few months ago, Mrs. Smith and her new husband came to my office to refinance their loan. (Mrs. Smith was happily married for the second time.) In speaking with the Smiths, it was brought to my attention, that the interest rate they had on their current mortgage was already quite low, for me to get it any lower (in this rate-raising market) was not going to be easy. In fact, it was going to be quite a challenge! Nevertheless, I agreed to try my best to look for a lower rate for the Smiths.
I started my search right away, however, during the time my office was processing the loan, I realized that somebody had put a lien against the Smiths’ property. I immediately contacted Mrs. Smith and she recognized the name to be that of her ex-husband! He had put a lien on the house- yet she was not even on the title! Mrs. Smith did not know what to do. I assured her that I would work with the title company to get this resolved.
Long story short, after a month of paperwork, I successfully helped her get the lien removed from the deed. The title of her house was again clear!
Back to the original purpose of her visit, which was to lower her interest rate on her current home loan, which I did not see that as a possibility at this time. You see, the interest rate had continued to rise during the time it took to clear the title. I proposed that we check into this matter again in the future.
Although, I never made a penny out of this entire process, it was truly a success story. I was happy to help Mrs. Smith resolve an issue that was negatively impacting her and her husband in the loan process. (Or even worse, if her ex-husband had passed away, or could not be contacted, the lien on the title would create a delay on anything Mrs. Smith would want to do with the house and there would be an even bigger hurdle to overcome in getting the title cleared! It is much better, for the Smiths, that I was able to take care of the issue at this time.)
March 27, 2017
Mr. and Mrs. Smith had worked very hard to pay off the mortgage on their house. However, by the time they both retried they still owed about $100,000.
As their regular income was gone, they had to use Social Security benefits to pay for the current monthly mortgage payment on the remaining $100,000. Which was not easy, because their combined benefits were only about $4,000 per month. Their monthly mortgage payment was about $1,800, and with the added expensive of property tax and home owner’s insurance, they were struggling to make ends meet.
Mr. and Mrs. Smith contacted a realtor to sell their home. With the precious family memories and the invested money and energy on upgrades and improvements that they have put into their home of 20 years, they realized that they really love the place and were not ready to let it go. So, they decided not to sell the house, and the realtor referred them to me.
After I had an interview with them, I realized that a reverse mortgage would really help them! They met the requirements: Both were more than 62 years old and they had plenty of equity in their home.
A reverse mortgage would pay off their current mortgage and set aside enough of reserve to pay property tax and home owner’s insurance. Best of all, they would have no monthly payments to make until they decide to sell their home, to possibly down size, or move into an assisted living type community.
Smiles finally returned to their faces. Now they could really enjoy their lives: They were planning a trip to visit South America. A trip they had been putting off for so many years that they were overjoyed to know that it was now going to become a reality!
Mr. Torres has been running a successful auto shop for more than 10 years.
He has never regretted owning a business, except that he has not been able to obtain a home loan because of being self-employment. He has applied for mortgages through numerous banks and has been turned down every single time.
Finally, Mr. Torres came to me through a referral. I studied his documents and realized that he had great cash flow each month from his auto shop. The deposits he has been making through the years have been very strong and the company has a very good Profit & Loss Statement.
Therefore, I used a Bank Statement Loan Program to qualify him. Today, not only does he have his dream home, but he has also purchased investment properties using this same loan program.
Another happy customer of mine!
Cathy (not her real name to protect the privacy) has been a client of mine for many years; I helped her to get her purchase loan when she first purchased a house some 10 years ago.
Over the years, she got in financial trouble (as most of us have during the great recession), and she started to pile up debt. She took out a second loan on her house and charged up her credit cards. Worse than that, she was not able to make minimum payments on her credit cards or make payments on time, causing her credit score to drop significantly. Thus, the interest rates on her credit cards skyrocketed! She really struggled each and every month just to get by. She was also never able to refinance her two loans as her credit score were too low. Pretty much all of her and her husband’s income was being used to catch up on payments. She literally could not even afford to go out to have a nice lunch.
She called me. At first I concentrated on helping her to improve her credit score enough to refinance her two loans into a FHA loan. Was this loan was secured, her monthly mortgage payment was reduced dramatically, this extra money she saved allowed her to catch up on the credit card payments. Six month later, her credit score improved nicely, and I refinanced her FHA loan into a conventional loan with some cash-out to pay off her credit debts. In the end, her total month payments were cut in half! Now, she can afford to enjoy that nice lunch she has been craving for years.