Without a substantial amount of cash at your disposal, buying a new home might appear to be an impossible undertaking. Skilled real estate investors, however, know how to use a variety of lending programs to their advantage. Property-based investment plans are often fulfilled by seasoned investors who rely upon bridge loans. These programs can also enable you to realize your homeowner goals.
California hard money lenders offering loans to commercial real estate investors can also provide essential financing to residential home buyers. The word “hard” might make the loan seem intimidating to some, but it can be easier to obtain than other borrowing options.
Short-term bridge loan lenders provide hard money financing that could enable the purchase of a second property even if you have not yet found a buyer for your first one. Purchasing residential property generally requires a down payment between 3 and 20 percent depending on the standards of a lender’s mortgage programs. Because property is used as collateral, hard money lenders typically do not require a down payment.
Consumers with less than ideal credit who are finding it difficult to purchase a new home can apply for funding through hard money lenders specializing in both investment and residential property. The qualification process requires a less stringent set of guidelines than a traditional mortgage loan. Unlike banks and credit unions, bridge lenders are not subject to federal regulations stipulating a 50% or less debt-to-income ratio. A lender may quickly approve a buyer with at least a 650 FICO score.
Investor vs. Homeowner Hard Money Loan
Because investors need to pay back larger loans, they usually plan to sell their property as soon as possible. Buying a three-bedroom home to use as a personal residence, however, requires less money than an apartment building. A homeowner also does not need to be concerned over generating an annual profit from their purchase.
Homeowners seeking funds through hard money lenders may need to commit to using their property as a primary residence rather than use it as a rental investment. Unlike investors, you may not be able to “flip” or sell your home for a specified period.
Making Good Use of a Bridge Loan
This short-term lending program acts as a convenient way to bridge the gap when investors or homeowners are in between two properties. When investors own a property and decide that it’s time to sell, they may plan to use proceeds from the sale to purchase their next investment property. If they are waiting on a buyer, however, they may not always have the funds required to make their next purchase.
A bridge loan can also be a workable arrangement that overcomes financing difficulties faced by home buyers. When the first property is sold, the proceeds repay the bridge loan used to buy the second property. If you own a home and need to sell it to purchase a new one, a bridge loan could be a better option to obtain the funding you need.
In many cases, waiting until a qualified buyer has entered into a contract to buy a current home can be extremely inconvenient or costly. Finding California hard money lenders that offer bridge loan programs can provide property owners with greater options for achieving their homeownership goals.