Bridge Loans in Houston: How to Unlock Home Equity to Buy Before You Sell
Explore the ins and outs of bridge loans in Houston: benefits, drawbacks, costs, providers, and modern alternatives. Learn how you can ‘Buy Before You Sell.’
Stepping into the real estate market in Houston can feel like a high-wire act, especially when trying to balance selling your current home with purchasing a new one. This balance of timing and funds becomes even more challenging in a market where inventory is scarce, and prices are sky-high.
For many Houston homeowners, the dilemma often boils down to selling first and then facing the inconvenience of moving twice, first to a temporary location and then to their new home.
But what if there was a smoother way to transition? Enter the bridge loan, a financial tool that could be the solution you’re searching for. This short-term financing option empowers you to secure your next home in Houston before you’ve sold your existing one, simplifying the buy-sell process significantly.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
DISCLAIMER: This post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Houston, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
A bridge loan, sometimes called a swing loan, bridging loan, interim financing, or gap financing, is a financial stepping stone. It’s designed to assist you, the homeowner, during the overlap period of selling your home and buying a new one in Houston. Here’s how it works: This type of loan leverages the equity in your existing home, providing you with the necessary funds to make a down payment and cover closing costs for your next home.
While bridge loans are typically pricier than conventional mortgages, they offer a significant advantage: speed. They enable you to quickly secure your new home in Houston without the wait that usually comes with needing to sell your old one first. This makes bridge loans a practical, albeit temporary, solution for those critical transition moments in your real estate journey.
How does a bridge loan work in Houston?
Imagine you’re in Houston, ready to move into your dream home, but your current house hasn’t sold yet. This is where a bridge loan comes into play, bridging the gap between selling your old home and purchasing your new one. It allows you to act quickly and secure the perfect new property, even though your existing home is still on the market.
The lender financing your new home often offers you a bridge loan. They’ll require that your current home is listed for sale and typically provide the bridge loan for a period ranging from six months to a year.
A critical aspect your lender will consider is your debt-to-income ratio (DTI). This calculation includes the mortgage on your current Houston home and the new property, and any interest-only payments on the bridge loan. This assessment ensures you can comfortably handle payments on both homes, at least temporarily.
In some cases, if your current home is already under contract and the buyer has secured their loan, the lender might only consider the mortgage payment for your new Houston home in the DTI calculation. This flexibility can be crucial in managing your finances during the transition period. Ultimately, lenders are focused on ensuring you have the means to manage both properties, especially if your current home doesn’t sell as quickly as anticipated.
What are the benefits of a bridge loan in Houston?
Bridge loans offer several advantages that can make your home-buying journey in Houston smoother and more flexible:
