Bridge Loans California
Bridge loans in California allow a property owner to borrow against their California real estate in order to help purchase their next property. California bridge loans are short-term and typically written for up to 11 months. This is generally a sufficient amount of time to purchase a new property and then sell the previous property.
A California bridge loan is recorded against the real estate with a note and deed of trust just like a traditional loan. Once the home with the bridge loan against it is sold, the bridge loan is automatically paid off through the purchase escrow. There are numerous benefits to obtaining financing from direct California bridge lenders.
California Residential Bridge Loans Benefits
California residential bridge loans help borrowers access equity in their current property to help purchase a new property. Direct bridge loan lenders provide these types of loans while traditional lenders typically do not. There are various benefits of a residential bridge loan for a borrower.
Avoid Moving Twice
Borrowers commonly need to access equity in their existing residence in order to purchase their next property. When a borrow has a significant amount of equity in their property, the most straightforward way to access that equity may be to simply the sell the property. Selling the existing property prior to having a new house to move into would require finding a temporary rental until a new property is purchased and then moving a second time.
With a residential bridge loan, the borrower can pull equity from their existing property and use the funds to purchase a new property and then move to the new home immediately. Once they have moved into the new home, they can sell their previous home. The sale of the property will pay off the existing residential bridge loan.
Debt to Income Ratio
The current federal regulations require a borrower to be below a certain debt to income ratio in order to qualify for a consumer purpose loan. In many situations, a borrower is able to easily qualify for one home loan but having two home loans at the same time (an additional loan to purchase the new property) would be too much debt for them to qualify.
Residential bridge loans are a special exception and a borrower is able to exceed the normal debt to income ratio (ability to repay requirement). Bridge loan borrowers can go beyond the normal debt to income ratio since residential bridge loans are only a short-term or temporary loan and the sale of the property qualifies the borrower for the ability to repay requirement. Bridge loans are written for less than 12 months.
Not having to qualify based on a debt to income ratio makes residential bridge loans especially helpful for seniors and retired people who have sufficient equity in their homes but have relatively lower current levels of income.
The borrower can take out a residential bridge loan against their current property to raise funds for the down payment for the purchase of their new property. The borrower can then also obtain an additional residential bridge loan for the purchase of the new property. Once moved in to the new property, the previous property can be sold which pays off the residential bridge loan recorded against that property. At that point the borrower can then refinance the bridge loan on their new property with a long-term loan as their debt to income ratio would be back to a reasonable level.
Fast Bridge Financing
Traditional lenders are usually not known for being able to fund loans quickly. The approval process alone can take many weeks in some situations. It is not uncommon for refinance loans from a traditional lender to take 1-2 months or more depending on the lender and the current market conditions. Traditional lenders are generally better about providing timely funding for purchase loans as they understand the borrower usually needs the funding to come through in order to close with a 30 day escrow.
A private money bridge loan lender can fund a residential bridge loan in 2 weeks for a purchase and 2.5 weeks for a residential bridge loan to pull funds from an owner-occupied property. If two bridge loans are needed (one to pull funds from an existing property and another to purchase the new property), the bridge loans can be processed simultaneously to easily complete a purchase with a 21 day escrow.
Borrowers with Credit or Other Issues
Borrowers with poor credit or other issues on their recent record (foreclosures, bankruptcies, deed in lieu, etc.) may not be able to qualify for financing from a traditional lender for an extended period of time. A residential bridge loan lender may be able to help a borrower in this position if the exit strategy for the loan is simply selling the real estate which the bridge loan would be recorded against.
Bridge Loan Lenders California
Bridge loan lenders in California are commonly private money lenders or hard money lenders that provide short-term loan secured by real estate. Direct California bridge loan lenders will record a note and deed of trust against the real estate in the same manner as a traditional lender would. Bridge loan lenders who are private or hard money lenders typically have far less paperwork and disclosures for the borrower to complete compared to traditional lenders.
Obtaining a bridge loan from a traditional lender such as a bank, credit union or other large lending institution may be very challenging as these types of lenders tend to focus on long-term 30 year or 15 year loans. They typically are not interested in providing a short-term bridge loan that will be repaid within months.
Bridge loan lenders in California are primarily concerned with the equity within the property. They will likely need to obtain personal financial information on the borrower including income, assets, debts and credit scores. California bridge loan lenders can overlook certain issues such as poor credit or other issues on the borrower’s record as long as there are compensating factors.
Bridge Loan Rates in California
California bridge loan rates are commonly in the range of 8-10% interest. The bridge loan interest rate will vary based on the lender, the specific loan scenario and the strength of the borrower. Bridge loan rates in California are much higher than conventional loan rates as the bridge loan is only intended to be short-term. While the interest rate is higher, most bridge loan borrowers only have the loan for around 2-3 months while they either sell the property or refinance with a traditional lender.
For more information on California bridge loans contact North Coast Financial at 760-722-2991 or contact@northcoastfinancialinc.com