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What is a Bridge Loan?

Bridge loans are temporary loans, secured by your existing home, that bridge the gap between the sales price of a new home and the home buyer’s new mortgage in the event the buyer’s existing home hasn’t yet sold before closing. Weighing the benefits and drawbacks of a bridge loan may help you decide if it makes sense for you.

Home Buying Benefits of Bridge Loans

  • The buyer can immediately put their home on the market and buy without restrictions.
  • Bridge loans might not require monthly payments for a few months.
  • The buyer can remove the contingency to sell and still move forward with the purchase if she’s made a contingent offer to buy and the seller issues a Notice to Perform.

Home Buying Drawbacks of Bridge Loans

  • Bridge loans cost more than home equity loans.
  • Buyers must be qualified by the lender to own two homes and many might not meet this stringent requirement.
  • Making two mortgage payments plus accruing interest on a bridge loan could cause financial stress.

**Welcome Home Loans, Inc. is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.

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