May 8th, 2017 11:14 AM by Andrew Liu, President NMLS#249736
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.