Are you dreaming of moving into a new home or condo that better fits your lifestyle but don’t know how you can confidently buy a new home while selling the one you’re in?
According to Redfin, agents don’t recommend putting in a purchase offer that is contingent on the sale of your current home, as sellers may not choose your offer—especially in a competitive market with higher interest rates.
At American Pacific Mortgage, we offer flexible home loan programs that help you move with confidence. Our bridge loan programs are designed to help you purchase your next home before your current one sells. These short-term loans give you the freedom to time your sale appropriately, while still presenting a strong, non-contingent offer to sellers.
How Does a Bridge Loan Work?
Bridge loans are short-term loans that allow you to tap into the equity of your current home—before it is sold—so you can use those funds to buy a new one. This can be a powerful strategy in a fast-moving real estate market, helping you move quickly without juggling the stress of temporary housing or back-to-back closings.
A bridge loan can:
– Provide extra time and flexibility in selling your current home.
– Help you act fast to secure your next dream property.
– Strengthen your offer by eliminating the sale contingency.
Close with Confidence with a Bridge Loan
If you already have a buyer in contract for your current home, this bridge loan option is for you. It allows you to use the equity in your departing property to make a new purchase—without having to wait for the transaction to close.
Key features:
– Pending sale of departing residence
– Loan amount up to $750K
– Loan term of three months*
– Minimum credit score of 680
– Combined loan-to-value (CLTV) up to 80%
– DTI not to exceed 50%
– May exclude departing house payment from DTI, depending on sale status
Debt Inclusive Bridge Loan
This program is ideal for homeowners who have listed their home for sale but don’t yet have a buyer in contract. You can still leverage your home’s equity to buy a new home—but all housing-related debts, including any bridge loan payments, are factored into your debt-to-income ratio.
Key features:
– Signed listing agreement
– Loan amount up to $750K
– Loan term of four months*
– Minimum credit score of 680
– Loan-to-value up to 70%
– Maximum DTI of 50%
– All housing debts included in the DTI calculation
There are no monthly payments on a bridge loan. However, an interest-only payment is calculated for purposes of debt-to-income ratio qualifying.
How Is a Bridge Loan Different from a Home Equity Loan or HELOC?
It’s easy to confuse a bridge loan with other types of equity-based financing like a home equity loan (HeLOAN) or a home equity line of credit (HELOC)—but they’re not the same.
A home equity loan is a fixed, lump-sum loan based on the equity in your home. It’s typically used for things like renovations or debt consolidation and comes with a longer term loan repayment period and a fixed interest rate.
A HELOC, on the other hand, is a revolving credit line. You draw funds as needed, pay interest only on what you use, and can access the line during a defined draw period—typically 10 years. HELOCs have variable interest rates, most often tied to the prime rate, but there are some exceptions.
A bridge loan is a short-term loan that you repay once your current home sells. It’s specifically designed to help you transition from one property to another without missing out on your next home. While the interest rate may be higher, bridge loans are all about timing and flexibility.
Each product has its own pros and cons, depending on your needs, financial situation, and credit history.
What to Know Before Applying for a Bridge Loan
Before moving forward with a bridge loan, it’s important to understand a few financial and logistical considerations.
Credit requirements
Most bridge loans require a minimum credit score of 680. Lenders also review your full credit history to assess payment behavior and risk. If you’re unsure where you stand, an APM Loan Advisor can help you review your credit and help you qualify for a bridge loan.
Origination fees and costs
Bridge loans typically come with origination fees, appraisal fees, and other closing costs. While these can often be rolled into the loan, they should still be considered when determining your total budget. Because the loan is meant to be short-term, you’ll want to weigh the costs carefully and understand how you’ll repay the loan.
Pros and cons
Pros:
– Allows you to make a strong, non-contingent offer on a new home.
– Avoids the pressure of selling and buying simultaneously.
– Gives you flexibility and peace of mind in your move.
Cons:
– May include a higher interest rate compared with traditional loans.
– Short-term nature means quicker repayment is required.
– Can increase your debt load temporarily, which may affect new loan qualifications.
When Does a Bridge Loan Make Sense?
Here are a few examples of when a bridge loan can be the right fit:
– You’ve found your dream home and want to move quickly, but your current home hasn’t sold yet.
– You’re relocating for a job and need to secure housing before you can list your existing home.
– You want to avoid making a contingent offer in a competitive housing market.
In any of these cases, a bridge loan can give you the leverage and confidence to move forward without compromising your goals.
Explore Your Options with APM
At APM, we understand that every homeowner’s situation is unique. That’s why our team of local Loan Advisors is here to guide you through your choices—whether that’s a bridge loan, HELOC, or home equity loan.
Our mission is to create experiences that matter. As an employee-owned company, we’re personally invested in helping you reach your homeownership goals with transparency, flexibility, and expert guidance.
Let’s talk about how we can help you bridge the gap and close with confidence. Click here to connect with a local APM Loan Advisor today.