Are you in a situation where you want to sell your house but you don’t know where to move to? In this video, I’m going to tell you about our Smooth Move Program, which utilizes a bridge loan to streamline the process. We’ll talk with Andy of First Bank to find out how it all works and see if this option is right for you.
Is It Time To Move?
Are you in a real quandary because it's time to sell your house but are scared of the process? Many sellers want to put their homes on the market but don’t know what their next step will be. While it can be very frightening, our program makes it easy.
Our Smooth Move Program can help you make the transition from your existing home to your dream home. It will also help you maintain that dream home-first attitude. Andy, from First Bank, will tell us how a bridge loan works in our program to make your dreams a reality.
Using A Bridge Loan
First Bank is a portfolio lender that holds some of its own paper. That means they have options that are a little bit outside of the box. My favorite program that the bank offers is the bridge loan.
As a privately held bank that owns a mortgage company, First Bank offers all the traditional mortgages: conventional, FHA, VA, and jumbo. However, they also offer internal loans that are called portfolio loans—which include the bridge loan. You can think of a bridge loan as a temporary mortgage that allows you to buy the next house before you've actually sold your current house.
Using a bridge loan takes a lot of the stress out of the market. Because it’s such a tight market right now, it's great to be a seller but can be really tough to be a buyer. The bridge loan allows us to take some of the stress out of being a buyer and helps you to identify and purchase your next house before you sell your current house.
The Qualifications
With a bridge loan, you don't have to qualify for both houses at the same time, as that’s a very challenging feat for people to achieve. When First Bank looks at a bridge loan profile, they just want to know that once you’ve sold your current house, gotten some of the equity out of it, and are rid of that existing mortgage payment, you would qualify for a traditional loan on the new house.
If you've got good equity in your current house and strong credit, you’ll likely be a good candidate for a bridge loan. Andy explains that First Bank is doing a ton of these loans currently because it’s so hard to get a listing agent or a seller to accept a contingent offer. The bridge loan allows the bank to offer a noncontingent approval letter; this means they’re telling that seller, ‘Hey, these are very strong buyers, they do own a home right now, but they don't have to sell that house for us to close on the new one.’
The noncontingent approval letter gives you a lot of strength and leverage when it comes to being a buyer in this market.
How It Works
When using a bridge loan, we can have your house prepped and ready for market—including pre-establishing photos and marketing materials—and get everything ready to go for your house. The only thing that will wait is the price tag because the market does fluctuate.
We look for your dream home today and start on that process while you're pre-approved for the bridge loan within. When we find the dream home, we can go in and make an offer, utilizing the letter from Andy for the bridge loan.
Exploring Your Options
Within the bridge loan, there are two options in two pathways. The first option is to utilize the bridge loan and not stress over the sale of your house until after we've gotten everything done and moved into the new house. This works tremendously for some people.
Personally, nine years ago, I bought the house that my wife and I and my family live in. We established the purchase of the new house utilizing the bridge loan so that we didn't have to write a contingency. We would have never, ever been accepted for this house without that; they would have taken another offer that didn't have it.
We wrote the offer with a position and immediately put our house on the market that weekend. I didn't sleep for four days getting it ready, and it was almost good to go. We put it on the market, sold it in the first weekend, and didn't have to use the bridge loan. Rather, we used it as a tool, having that pre-qualification to go into the next one, and ended up having a traditional mortgage.
There's no other lender I know of that has that capability to make your smooth move transition as well as First Bank can.
Changing The Program
My case is certainly not unusual. Andy says that about 20% of the time they write a bridge loan approval letter, the client can sell their house fast enough that they don't even need the bridge loan. That’s fine with First Bank, as 95% of the mortgages they do are the traditional VA, FHA, jumbo, and conventional loans.
When I get your house on the market and get a contract on it—and the buyers can close on or before the purchase of your new house—we just changed the loan program. We’ll never close on the bridge; we'll just turn around and change it to a traditional mortgage, which is absolutely easy to do.
The Downside Of The Bridge Loan
When using the bridge loan, there is one downside: you'll have to close twice. You'll close initially on the temporary mortgage—the bridge loan—and then close on the refinance once you sell your house. First Bank will likely refinance the bridge into a traditional.
While you're not required to use First Bank for the refinance, they probably do 99% of our bridge loan refinances. If they do your bridge loan refinance, we'll waive all of our lender fees. We can also typically reuse the appraisal and the survey, making closing costs less than half the traditional amount.
While there is a little bit of a downside to the bridge loan, there is something you can use to offset it. Because First Bank doesn’t require you to list your house until you've moved into the new one, you can sometimes sell your existing house for a little bit more money when it's not occupied. The other nice thing about it is that you don't have to take the first offer that comes in. You don't have that stress of needing to hurry up and sell within 30 days. This allows you to negotiate from a position of strength.
Your Mortgage Payment
When you use the bridge loan, you're only making one mortgage payment during that time. You're not making a mortgage payment on the new house for up to six months. So while it’s an interest-only loan, First Bank defers the payments on the new house for up to six months. That way, you're not making two payments at the same time.
This allows you to have plenty of time to sell your house. While you don’t necessarily need all of that time in this market, it’s nice to know you have it. but you have it. If you're doing a traditional mortgage, it usually takes about 45 to 60 days before that first payment is due. If you close with a bridge loan, you've got up to six months before you're making any kind of payment on the new house.
This creates a really smooth process. Normally, there is a lot of stress and moving parts to organize and put into place. Using a bridge loan creates an easy transition at no extra cost than a traditional route.
Now Is Your Chance
This is a wonderful time to sell a home and buy a new one. In fact, it may be the chance of a lifetime, as home prices are at record highs. It’s great to be a seller right now; with the Smooth Move Program and a bridge loan, it allows you to take some of the downsides out of being a buyer.
It’s tough to be a buyer, especially when you're making contingent offers and need to compete. This program helps remove some of those struggles and allows you to leverage and take advantage of the market. It allows you to sell your house for the maximum dollar and take some of the stress out of being a buyer by removing contingencies and letting you buy before you actually sell.
So if you're thinking about selling, you want to move, and you want to take advantage of the market’s interest rates while they're low, this is an opportunity for you to make a smooth move transition and get into your dream home. Remove your fears and let's make this happen! Feel free to reach out to me and I’ll be happy to help you get started.