A ‘Buy Before You Sell’ Bridge Loan in Arkansas Unlocks Your Home Equity

Buying and selling a home at the same time presents so many dilemmas for Arkansas homeowners. Aside from the fact that it’s nearly impossible to sync the timelines of both transactions because of many dependencies, you worry about not having enough funds for your purchase as you wait for your current home to sell. On top of that, there’s the possibility of moving twice — first into a temporary spot and then again into your dream home.

But what if there’s a smoother way to navigate this transition? Consider a bridge loan, a short-term financial solution designed to bridge the gap. A bridge loan empowers you to purchase your next Arkansas home before you’ve sold your current one, offering a lifeline in aligning your real estate dreams with reality.

DISCLAIMER: This post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Arkansas, HomeLight encourages you to reach out to your own advisor.

What is a bridge loan, in simple words?

A bridge loan is a short-term loan that provides you with the necessary funds to buy your new home before you’ve sold your existing one. It uses the equity in your current home as leverage, giving you the cash needed for a down payment and covering closing costs on your new property.

Think of a bridge loan as a temporary financial solution. It effectively “bridges” the gap between the sale of your current home and the purchase of your new one, easing the strain of timing and financial constraints.

Typically, bridge loans are short-lived, with durations ranging from six months to a year. Keep in mind, due to their short-term nature and the risk involved, bridge loans often carry slightly higher interest rates than traditional mortgages. However, they can be an invaluable tool in ensuring a seamless transition to your new home in Arkansas.

How does a bridge loan work in Arkansas?

A bridge loan provides a fluid transition, allowing you to move forward with purchasing your new Arkansas home without having to wait for your old one to sell.

Often, the lender who is financing your new home will also provide the bridge loan. They usually require that your current home be actively listed for sale and offer bridge loan terms ranging from six months to a year.

A crucial factor in this process is your debt-to-income ratio (DTI). Lenders will calculate your DTI by considering the payments on your existing mortgage, the new mortgage payments for the home you are purchasing, and any interest-only payments on the bridge loan, if applicable.

However, if your old home is already under contract and the buyer’s loan approval is finalized, some lenders may only account for your new mortgage payment in the DTI calculation. These considerations help ensure that you can comfortably manage payments on both properties, providing a safety net in the event that your current home doesn’t sell immediately.

What are the benefits of a bridge loan in Arkansas?

There are several advantages to securing a bridge loan in Arkansas that can make the homebuying experience more flexible and less stressful.