Back in late 2022, housing economists were lamenting the arrival of a “real estate recession.”
With mortgage rates up and affordability down, all signs indicated the housing market was going into a deep freeze.
Instead, it’s still a seller’s market. Redfin reports that the average sale-to-list price ratio hit 100.1% during the four weeks ending July 2, marking the first time in nearly a year the typical U.S. home sold for more than the asking price.
An inventory shortage is the main reason homes are selling above their asking price, with new listings down 25% from a year ago and the total number of homes for sale down 12%. One culprit is the spike in mortgage rates – homeowners are clinging to the low mortgage rates they locked in during the pandemic. Meanwhile, the National Association of Realtors reports there was just a 3-month supply of homes for sale as of May 2023 – a level that fits any definition of a seller’s market.
These market trends might be good for homeowners and sellers, but they’re not so great for homebuyers – and that creates a strong opportunity for bridge financing. This compelling product lets your homebuyer client shop as if they were a cash buyer. Instead of waiting for the sale of their current home to close so they can use the proceeds from that sale for a down payment, the buyer can use a bridge loan to move quickly.
LendSure’s bridge loans let home sellers tap their equity so they can become buyers today – not when their home sells weeks or months from now. In contrast to other bidders, who must wait to sell their current homes first, a buyer with a bridge loan has a real competitive advantage. A bridge loan lets your client make a winning offer without requiring them to make monthly payments.
How is a Bridge Loan used?
A bridge loan is a short-term loan that is paired with the purchase mortgage on the buyer’s next property. Through this program, the borrower can access the equity in their existing home by getting cash out to use as a down payment on the new home. The bridge financing loan also pays off the existing mortgage, making this product especially valuable in a seller’s market.
- Bridge Loan on Existing Property
The borrower’s current property is listed for sale, and when the sale closes, the bridge loan balance is paid off. The bridge loan has a one-year term, with no monthly payments, and no prepayment penalties. Because there are no payments, no debt-to-income (DTI) ratio is calculated on the existing property loan.
- Purchase Mortgage for New Property
The borrower can make an offer on their new home by using the cash-out proceeds from the bridge loan as a down payment. A wide variety of loan programs are also available to choose from. For example, income from self-employed borrowers can be calculated using bank statements.
Watch this real-life loan scenario to learn more.
Why Should I Consider A Bridge Loan For My Borrowers?
A bridge loan can be an ideal solution for a borrower seeking to purchase properties between $150,000 and $3 million – but whose cash is tied up in another property. Bridge loans empower your borrowers to move fast on a desired property without waiting to close on the sale of their current home. It’s a compelling way for offers to stand out and be successful in today’s intensely competitive purchase market.
How Does It Work?
At LendSure, pre-qualification for bridge loans can take as little as 24 hours, and full conditional approval is usually complete within 48-72 hours. By providing fast solutions to clients, your business will enjoy a high growth potential.
With Lendsure’s bridge loan, your borrower makes a one-time repayment due at the end of the loan term or when the property sells, with interest accruing during the life of the loan. Other restrictions and limitations may apply.
Here are some of the Benefits Bridge Loan Offers:
- No monthly payments. A single payment is due when the borrower sells their current property or at the end of the loan term.
- Up to 12 months to sell departure residence. Your client has up to a year to sell their current home, so they can get the best selling price possible.
- Make a non-contingent offer on your client’s new property. Win in a hot purchase market by making a non-contingent offer! Opting for a bridge loan could enhance the competitiveness of your client’s application.
- Your clients can access the equity from their current home to purchase their next one. The bridge loan will pay off their existing mortgage AND provide cash out to purchase the new home.
Why Should I Become A Bridge Loan Expert?
Our bridge loans can help you build a stronger business relationship with your real estate agents, which leads to more referrals. By offering bridge loans and other non-QM products to your borrowers, you’ll stand out as an expert. Our customized solutions help clients accomplish their unique financial goals.
In today’s competitive real estate landscape, buyers need to be empowered with swift, successful transactions. Bridge loans can be the perfect solution for property owners who need liquidity to buy a property. It’s that simple.
*New* LendSure’s Bridge Loan Calculator
Access our Bridge Loan Calculator under our Broker Resources Menu. Enter your client’s loan details, and instantly, you’ll receive a downloadable summary that includes your client’s Bridge Loan on the Departure Property and the New Property Purchase Loan.
Use our Bridge Loan calculator with your realtor partners and borrowers to show them how much cash they can take out of their departure residence. The calculator automatically applies the cash-out amount to the new home purchase loan so you can see the borrower’s buying power!
The LendSure Way
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers and ratios, and data to consider, but we know that behind every file, there’s an individual with a unique circumstance seeking a loan. We work hard to offer our common-sense take on lending to borrowers seeking funding for the home of their dreams, another addition to their investment property portfolio, or refinancing of a currently-owned property.
Are you ready to grow your business? Conventional loan approval guidelines can be restrictive, but we want to offer our mortgage broker partners the education, tools, support, and guidance they need in order to say “yes” to more of their clients. This ensures happy borrowers and opportunities for bottom-line growth. What are you waiting for? Let’s get started!