Have you heard of a bridge loan? This is a loan feature that is frequently found when homeowners are building a new home while living in their previous home which they will sell once the new home is complete. A homeowner purchasing a new residence plans to make a down payment with the proceeds from the sale of a currently owned home, but the currently owned home will not close escrow until after the close of the new residence. A bridge loan allows the buyer to take equity out of their current home and use it as down payment on the new residence, with the expectation that the current home will close within a short time frame and the bridge loan will be repaid.

Pros:

• You do not need to wait until your home sells to move forward with your purchase
• You will be able to live your lives without the need to be prepared for showings of your home
• You may purchase at a lower value point in the real estate market range while the buyer of your previous home catches it further up
• These loans are equity based and often require limited income/asset documentations

Cons:

• These loans usually bear high rates of interest and may be costly due to the speculative risk the lender agrees to accept
• Bridge/Swing loans are short term loans, and could be called due if your existing home falls out of contract and/or doesn't close before the due date resulting in foreclosure
• In the current tight credit environment, these loans are not readily available

This loan is frequently used in business ventures, and bears a great deal of risk in this application, in my humble option.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com