What is a bridge loan?
A bridge loan gets you from the house you’re in to the house you want, without waiting on the sale in between. Most people’s down payment is sitting in the house they live in now. That’s a problem when you find the next place before the old one sells.
Here’s how the setup I use works. A bridge loan company pre-agrees on a price for the house you’re selling and gives you the money for the down payment on the new one. You buy the new house, move, and then sell the old one.
When does it help you buy before you sell?
The classic spot: you found the house, but the seller won’t take a contingent offer. A contingent offer says “I’ll buy your house if I can sell mine first.” In a busy market, sellers with other options often pass on that.
A bridge loan takes the contingency off the table. Your agent gets to write a non-contingent offer, so it competes with buyers who don’t have a house to sell.
It’s a good fit when three things are true:
- You have equity in the house you’re selling. That’s where the down payment comes from.
- You have a house you want to buy. This is for a real deal, not a someday plan.
- The seller won’t take a contingent offer. If they will, a contingent offer may be the simpler path.
What about qualifying for two mortgages?
This is the part that stops a lot of move-up buyers. Normally, until the old house sells, a lender counts both payments against your income. With this setup, we can leave your current payment out of your debt-to-income. So you don’t have to qualify for two mortgages, and you’ve got six months to sell.
The tradeoffs
A bridge loan solves a timing problem, and it isn’t free. Go in with your eyes open.
- It costs something. Ask what every fee is, in dollars, before you sign. Then compare it to the other ways to get the same result.
- Know the pre-agreed price. Ask how it compares to what your agent thinks the house will sell for, and what happens if it sells for more or less.
- Six months is the clock. Have your agent and a plan for the old house ready before you close on the new one.
- Not every house or borrower fits. Equity, the property, and the rest of your file all matter. I’ll tell you early if it doesn’t work.
Other ways to do it
A bridge loan isn’t the only tool. Depending on your situation, these might fit better:
- A home equity line on your current house. A Texas HELOC can put your equity to work for a down payment. Texas has its own home equity rules and waiting periods, and lenders usually want it set up before the house goes on the market.
- A cash-out refinance. It pulls equity out by replacing your current loan. Texas cash-out rules apply here too, so it takes some lead time.
- Selling first. Sell, then buy, maybe with a short stay somewhere in between. Less carrying risk, more moving.
- A contingent offer. If the seller will take one, the Third Party Financing Addendum and the option period are worth understanding before you write it.
Ready to start?
Start the short application, or call me at 817-873-6288. Tell me about the house you’re in, the one you want, and what the seller said. If a solution exists, we’re gonna find it.