The Nest

NestApple's Real Estate Blog

Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.

What is a Bridge Loan to buy a Home in New York?

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New Yorkers often struggle to get the downpayment when they’re buying a property in New York City. Getting a mortgage isn’t easy. There are a lot of What is a Bridge Loan to buy a Home in New Yorkoptions to help people get to ownership of an NYC home. The two most significant concerns buyers face when it comes to getting approvals are income and the down payment. VA loans do not require a downpayment. However, civilians don’t access to that type of loan. Saving up for a down payment isn’t easy, especially if you want to upgrade your home. Depending on the situation, seeking a bridge loan to buy a home might be a good option for you.

How a Bridge Loan Can Help You

A Bridge Loan to buy a home “bridges” the gap between selling and buying. Sellers can use it to purchase a new home right away. Their funds get are tied up with their home sale, which sits on the market but has not sold. This loan is short-term. Lenders expect to get repaid with the property sale. However, bridge loans carry high fees and interest rates. Some typical requirements to qualify are having good credit and having at least a 20% equity in your property. Most bridge loans take place in a hot real estate market.

What is a Bridge Loan to buy a Home?

This loan that acts as temporary funding for a property purchase while borrower secure longer-term funding. In the New York real estate world,What is a Bridge Loan to buy a Home in New York buyers use bridge loans to get a downpayment ready on a new property while they wait for the sale of their own home. Buyers use bridge loans to help get the funds necessary to buy a home, but they aren’t long-term loans. Instead, they are short-term loans that you need to pay off with the sale of your property is sold or within a year.

Why using a Bridge Loan to buy a Home?

Bridge loans can be attractive to specific buyers.

  1. Get a downpayment and cover closing costs.
  2. The approval process is quick, which makes buying a home faster.
  3. Some sellers will take a buyer who has a bridge loan over a buyer who doesn’t.

What is the inconvenience of having a Bridge Loan to buy a Home?

They carry high-interest rates and high fees. The terms are short. It’s a notoriously expensive route to go, but it’s a short term solution.

When should you get a Bridge Loan to buy a Home?

Using these loans tends only to make sense when you are looking to buy a property in a hot market. You know your home is going to sell, and need to bridge loan new york citymove ASAP. They are pricey and somewhat risky. However, if you need a quick real estate closing, they can make sense.

How Do Bridge Loans Work?

The concept is that you will usually use your current home’s equity as leverage. There are two options:

  1. To pay off your original mortgage and give you extra cash for a down payment on a new home. When the house gets sold, you pay off the bridge loan.
  2. To create a downpayment if you already paid off your home. You can use a bridge loan to get the downpayment. These loans are far lower in equity.

What happens when your property is not selling?

If you can’t find a buyer within a year, some lenders may extend the terms. However, you need to pay both your mortgage and the bridge loan, which can lead to a loan default. If you aren’t confident your home will sell, you shouldn’t try to get a bridgenew york real estate and mortgage loan. It could easily backfire.

Can I Qualify For A Bridge Loan to buy a Home?

Though all lenders will have their requirements, there are some general guidelines they follow:

  • At least 20% equity in your home.
  • Excellent credit. (at least 720)
  • Your home must be in a hot and liquid market.

What are the Alternatives To Bridge Loans?

If a bridge loan doesn’t make sense, there are other options to meet the same goal:

  • HELOC (Home Equity Lines of Credit) — is a credit line based on your home equity. HELOCs carry a better rate, lower fees, and a longer-term. new york real esateIf you don’t sell your house, a HELOC will still allow you to finance home improvements.
  • 80-10-10 Loans: This involves taking out two mortgages to avoid the 20 percent minimum down payment requirement on a traditional loan. One loan is for 80 percent, the other is for 10 percent, and the rest of the down payment will only be 10 percent.
  • Trying A Different Loan Type: You might not be able to get a VA loan, but you still might be able to avoid paying 20 percent down on a home through other lending methods. FHA loans, for example, only require 3.5 percent down in many cases.
  • Asking For Help: Several groups help people get their home down payment despite not having the funding available. Checking the New York Housing Authority for assistance can help.

Written By: Georges Benoliel

Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.

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