BRIDGE LOANS: AN INTRODUCTION
They are used by both an individuals and corporations and can be customized for many different situations. For example, let's say that a company is doing a round of equity financing that is expecting to close in six months then a bridge loan could be used to secure working capital until the round of funding goes through. In the case of an individual, these loans are common in the real estate market. As there can often be a time lag between the sale of one property and the purchase of another, then this loan allows a homeowner more flexibility. Many lenders do not have set guidelines for FICO minimums nor debt-to-income ratios, therefore, funding is guided by a more "make sense" underwriting approach. The piece of the puzzle that requires guidelines is the long-term financing obtained on the new home so some lenders who make conforming loans exclude the bridge loan payment for qualifying purposes. This exactly means that borrower is qualified to buy the move-up home by adding together the existing loan payment, if any, on the buyer's existing home to the new mortgage payment of the move-up home. The reasons that many lenders qualify the buyer on two payments are: • Mostly, buyers have an existing first mortgage on a present home. • The buyer will likely close the move-up home purchase before he sells an existing residence. • The buyer will own two homes for a short term home. If the new home mortgage is a conforming loan then lenders have more leeway to accept a higher debt-to-income ratio by running the mortgage loan through an automated underwriting program. If the new home mortgage is a jumbo loan then most lenders will restrict the home buyer to a 50% debt-to-income ratio. The benefits of buying bridge loans for home buying are that the buyer can immediately put a home on the market without restrictions. Second thing, these loans may not require monthly payments for a few months. Last but not least, if the buyer has made a contingent offer to buy and the seller issues a notice to perform then the buyer can remove the contingency to sell and still move forward with the purchase. Similarly the drawbacks of these loans on buying home are that these loans cost more than equity loans. Also, buyers will be qualified by the lender to own two homes and many will not meet this requirement. Lastly, making two mortgage payments, plus accruing interest on a bridge loan could cause stress. About Author Dresscodeformal offers various dresses like Special Occasion dresses , Bridesmaid Dresses, Prom Dresses and many more for every special occasion. Disclaimer: Article submitters are solely responsible for the content of their articles. ArtiLib can't be held liable for the contents of the articles. Report Abuse | Browse By Category |
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