It’s a common dilemma. You’re ready for a new house, but in order to have a sizable downpayment on the new home, you need to sell your existing one. Some sellers are willing to wait for you to get your home sold, others are not. What are your options as a buyer and seller? How can you snap up the new home of your dreams without having sold your current home yet? How do you bridge the divide between the transactions? A bridge loan could be the answer!
Of course, the most conservative course of action is to ask the seller of your future house to WAIT for you to get your existing home sold. However, that is not always realistic. Sometimes competition for a home is so fierce that an offer with a sale of home contingency will simply not be considered. Many sellers are not interested in having their transaction and plans tied up in your home sale…after all, they have no control over what you choose to do or not do to get it sold. Other times, they may accept your offer with a sale of home contingency tied to it, but then another buyer comes along and tries to bump you from purchasing the home, which will happen unless you’re able to drop your sale of home contingency. Then what? Do you go back to square one in searching for a home, or is your heart set on the one you already found? Sometimes, it is not realistic for a family to put their house on the market until they’ve moved out, in which case they know they’re going to need money to close on their new home. You need something to bridge the divide.
One option for these scenarios is a loan product called a bridge loan. In the simplest terms, a bridge loan allows you to have access to your existing home’s equity BEFORE you sell it. Watch my YouTube video as local lender, Eric Baumgarth, of the University of Iowa Community Credit Union and I explore the topic and touch on many common questions about bridge loans.