Many home buyers prefer to sell their current home before seriously starting the process of searching for and purchasing a new one, but sticking to this traditional method may limit your options for capitalizing on the best possible opportunities. Bridge loans are one of the most common options for reversing this order, which can help you make a purchase that is ultimately a much better fit for you by doing it much earlier instead of having to wait until significantly more steps are completed. These loans can help you use money that you anticipate receiving from the sale of your home before you have it, which can give you a much higher level of flexibility when it comes to deciding when you want to make various decisions. 

Understanding Florida Bridge Loans 

Securing the funding you need to purchase a new home can be a complex process, especially if you are doing so at the same time that you are selling your current home. Many home buyers will not have access to money that they may need to fully qualify for a new mortgage until the process of selling their current home is complete, and securing a bridge loan is a common method for managing this temporary predicament. These short-term loans are used to bridge the gap between your financial qualifications and obligations to two concurrent processes by providing temporary access to funds that the future sale of your home will eventually bring in to help you purchase a new home with money that you do not technically have yet. 

Unlike traditional mortgages, bridge loans typically need to be paid back in full within approximately 1-3 years because they are based on money that you anticipate having in the near future. This means that individuals that qualify for a bridge loan should have no need to pay it off over a longer period of time as they would with a mortgage that involves significantly more money than they are likely to be able to pay at any given time. Many buyers obtain a mortgage on top of their bridge loan, which gives them more time to pay off additional money beyond the sale price of their current home. 

Bridge loan qualification decisions are generally made using similar criteria to information that may be reviewed when applying for a mortgage, such as your debt-to-income ratio, credit score, household income, and home equity. These figures will be compared to the approximate amount that you anticipate selling your current home for to determine a reasonable price range to consider purchasing a home within and what a bridge loan might look like for your complete home buying, selling, and overall financial situation.  

Advantages of Florida Bridge Loans 

Bridge loans can significantly increase your options for buying and selling homes on your preferred timeline. Although selling your current home before purchasing a new one may be the most logical option from a financial standpoint, there are many situations in which having to find a third place to stay in the meantime or preventing the complete process from moving as quickly as possible may not be desirable or feasible.

With this increased flexibility, you may have more options for quickly capitalizing on opportunities, which can set you apart from competitors that need more time to make more traditional sales and purchases. You will also have the option to leverage existing equity for other investments you may consider making in the future while reducing certain types of risks that may be associated with more traditional property acquisition methods. 

Real-Life Examples of Success 

Some examples of ways in which individuals and businesses may benefit from utilizing real estate bridge loans include: 

• Home flipping 
• Purchasing a property off market 
• Making a non-contingent offer 
• Renovating your own property
• Expanding your rental portfolio 

How to Secure a Florida Bridge Loan 

Applying for a bridge loan is a complex process that can be difficult for some buyers to get approved for, which means that getting started as soon as you decide that you are sure that buying a new home before selling your current one is the best option for you is a must. However, rushing through the process may increase your chances of forgetting essential information or making other errors that may make your application less likely to be approved. 

Compiling documents that verify your income, assets, credit score, specific details about why you are considering a bridge loan, and other key information before starting your application is an important step in creating the best possible picture of your financial situation to increase your chances of being approved. You will generally need a very strong credit score, a low debt-to-income ratio, and no major red flags that indicate that you may have a hard time selling your current home to qualify for most bridge loans, and better data in these areas may help you obtain lower interest rates. You will often need to apply for your bridge loan from the same lender that you are using for your mortgage, which means that doing plenty of research to find one that meets both your mortgage and bridge loan needs is a must. 

Risks and Considerations 

Like any major loan, a bridge loan can also come with significant risks that should be carefully considered before making a decision. While these risks do not necessarily make obtaining this type of loan a poor decision for the right buyer, it is essential to have a thorough understanding of your long-term financial situation and be certain that a bridge loan is your best option before moving forward. 

Bridge loans provide access to a significant amount of money that must be repaid within a very short time frame in comparison to a traditional mortgage, and sellers can never guarantee that they will be able to sell their home for the price they are expecting or within their intended time frame. Your home also may never sell at all, especially if it is in poor condition or your asking price is significantly above market value for similar homes in your area. You will likely still be responsible for repaying the full cost of your bridge loan even if selling your home does not go according to plan, which may result in having two mortgages at the same time, defaulting on your bridge loan, or foreclosure. 

Because bridge loans are short-term loans that carry such a high risk to lenders, they typically come with much higher interest rates than traditional mortgages. Many lenders require buyers to have a minimum of 20 percent home equity prior to applying, and these loans can carry high fees that may significantly increase the overall purchase cost of your new home. These loans can be difficult to qualify for and many lenders will only consider your bridge loan application if you are also applying for a mortgage from the same lender, which can significantly limit your options for trying again with a different lender or even comparing lenders to find the best fit for you. 

While bridge loans can come with high risks for both borrowers and lenders, they can still be a good solution for a home buyer with a reasonably stable financial situation that exceeds minimum application requirements and does not anticipate having any problems selling their old home within a reasonable time frame. If your real estate agent identifies specific concerns that may delay the sale of your home, such as major repairs that need to be made or other safety concerns, an exceptionally high asking price for your area, or a neighborhood that is notorious for struggling to sell homes, your risks may outweigh your benefits. In these situations, focusing on getting your home sold before starting the buying process is likely to be a much more responsible decision. 

Consider a Florida Bridge Loan to Help You Meet Your Real Estate Goals 

Bridge loans provide a significant amount of flexibility for capitalizing on time-sensitive real estate opportunities because this option makes it possible to make quicker decisions without having to wait for your home to sell before taking advantage of an excellent fit that is unlikely to be on the market for very long. These loans can play an especially large role in wealth development for buyers that are looking to make significant upgrades, manage multiple properties, or take other steps to make your real estate decisions improve your overall financial situation. Whether you currently live in Florida or are looking to move here, Prime Wealth Development can help you explore your options for increasing your likelihood of being approved for a bridge loan. 

About Prime Wealth Development 

At Prime Wealth Development, we offer a wide range of financing solutions that can help you manage nearly any need. Bridge loans and other real estate financing options allow us to help you buy and sell homes in the ways that work best for you, and we offer similar services for navigating healthcare, consumer financing, SBA loans, 401K financing, and a wide range of other financial decisions. Contact us today to learn more about why working with us is an excellent choice for securing a Florida bridge loan and how taking this step can help you achieve your real estate goals!