🌉 Bridge Loans | Mortgage Rates LIVE

🏗️ Buy now, move fast!
Join us LIVE to review Daily Mortgage Rates and focus on Bridge Loans, a short-term purchase financing option that allows buyers to “buy before they sell.”

We’ll cover how bridge loans work, eligibility, benefits, and when this type of financing makes sense for borrowers needing speed and flexibility in their transactions.

📲 Join us live, leave comments, and ask questions throughout the stream!

🎥 Watch the full episode:
👉 https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

Catch all the episodes of Daily Mortgage Rates LIVE at https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

Check out all episodes of Daily Mortgage Rates LIVE at https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages...

Transcript

Today, we'll be reviewing bridge loans, kind of a general category. But, basically, the topic for today would be accessing equity in a current home in order to purchase a new home.

So payment assistance, little bit different. We're all, propose a couple different ways we can assist. But if you'd like more info, please, we have over 200 loan officers that would be happy to help you out. And, again, this is Daily Rates with the calculator. We are a licensed lender and broker over 20 states with over 200 loans.

A breakdown of any of the items we go over today, any of the programs, please get with our team members. We're just gonna need to help you out. So what we do every day is we're going to check out the general markets, check out our standard programs, and then do this deep dive into bridge loans. So let me go ahead and answer my screen, and we'll get set for today.

So we wanna start out with here, in general, today is a big day for a rate announcement. There's a Fed decision today. But you see here, overall, this is the last five days. There's ups, there's downs. There's going to be activity every day here on the ten-year treasury, which is the best overall indicator of rates in general, because it allows us to compare just rates as an overall metric. But what we wanna do always is pull out the one-year look back here to see we're still at well under our one-year lows here, and rates are definitely looking good for everybody out there shopping.

So the day-to-day, definitely pay attention to, but overall, it is a great time to be in market.

Now let me zoom in and touch on here. Let's check out our standard rates for our standard programs here. We always set up an area with a standard single-family home, $500,000 purchase, $300,000 loan amount, 760 FICO credit score, and estimated 40% debt-to-income ratio. That way we can compare all the different loan programs across the board here.

We have a couple dozen programs here, but we'll go over our main options.

First up, our conventional loans for a primary home. This is typically what you think of when you think of a mortgage. Thirty-year fixed options, rates as low as 5.625 today.

That APR comes in with all the fees at 5.881. And if our customer doesn't qualify, we typically wanna look at FHA, which allows more than a higher overall debt-to-income ratio. FHA coming in today at 5.125, but FHA does require upfront and yearly mortgage insurance, which puts the final APR at 6.031. So we always wanna use that APR to compare programs. The conventional is a touch cheaper, which is pretty typical.

And our VA programs, active service members, these programs are pretty amazing. Rates as low as 5.25, but much lower fees here for our VA programs. When you compare to FHA there, finally, PR comes in at 5.489, much lower, and the best option typically overall for our.

And USDA is for properties in the USDA eligible area, the rural areas of the country. The property is eligible and the borrower is eligible. These programs are pretty amazing to look at, reaching those 5%.

Like, we are 5.675. So for customers looking in those areas, typically gonna be comparing an FHA or conventional option, and you see that for both. So definitely a great option for the customers.

And where we start to shine here at the Mortgage Calculator, we'd love to offer our outside-the-box solutions. So first up, our non-QM options here, which are outside of the standard four options that all lenders have.

We have our option. So we can use things such as bank statements, P&L statements, all kinds of different options here under alt doc. And if our customer doesn't qualify for any of the standard agency or government programs there, typically, our self-employed borrowers have a challenge sometimes and may need to use alternative docs. We can do that here. Rates are pretty amazing.

It's about 6%. Finally, PR is 6.272. So a touch higher than conventional, which is pretty typical, but pretty amazing for our customers to be able to use those alternative docs to qualify.

And we can use alt docs for investment properties. Rates today for investment coming in at 6.125. Finally, PR is 6.448.

And compare that to conventional for investment properties, jumped up a little bit here for a 6.125 rate. Finally, PR 6.438. Still beating our alt doc option by just a touch for conventional. Those are almost identical.

But what we love to offer here is our DSCR options, no income or employment needed. These are for rental properties only. So for this option, we simply use the estimated rent at DSCR ratio. Basically, if the property cash flows, that is a ratio over one, and that is what we set for all the scenarios here.

And this option has a three-year prepayment penalty to sweeten the deal. Rates come in at 5.999, lowest rate option. And finally, PR 6.22. So when you compare that to conventional, it beats it, which would be amazing, and it beats alt doc as well, specifically because we're able to add that prepayment penalty.

And we have our option with the five-year prepayment penalty here. Rates come down a touch to 5.1875. Finally, PR 6.181.

And there is an option for no prepayment penalty, and 6.125. Finally, PR 6.448.

So those are our options we love to go over in our live ratio. Notice that when you scroll down here, there are dozens of other options: commercial, SBA, bridge loans (we'll be talking about today), 203k, one-time close, all kinds of different options.

But let's get into our topic for today. So there's a little hard to paint the picture, but hopefully, everybody can conceptualize what we're doing here. So as always, I'm gonna pull up a full property that's for sale.

So this is the property just nearby where I am here for sale, pops up at $649,000 price. So if our customer is looking to upgrade their home, perhaps move neighborhoods, perhaps move states, and is looking to purchase this home, but unfortunately may not actually have the cash to do so. So this is where we can offer a bridge loan.

So if our customer here wants to buy this home, they actually make plenty of income, and they actually have a property that they're moving out of that they're looking to get a loan against or sell. Obviously, many times our borrowers are trying to sell their current primary to purchase any primary, and we're trying to expedite that here with a bridge loan or some of our other solutions.

So in order to purchase this home and access equity in a current primary or a current investment property, a few different ways we'll chop this up here. For the down payment, there are a few ways to do it.

So first up, let's go with the standard option first. The standard option, that has typically been available to most customers here, is to use a HELOC as a bridge loan. So a HELOC will allow us to access equity in a current primary or even a current investment property, whatever it may be. And remember, secured funds from a loan from a secured loan that's against the property are usable for a down payment, closing costs, etc.

So we can use these funds from a HELOC for a new conventional home, but we do need to take into account the payment. So before we look at the rates here, this is the biggest thing we wanna compare: how is this loan that's accessing our equity that we're trying to access going to affect our new loan to actually purchase the new home?

So in many cases, our customers are oftentimes tight on debt-to-income ratio, which is the qualification method. And in this case, we have to add some additional payments. So in this case here, it's a little bit hard to see, I know, but this allows us to use a HELOC for a down payment. We must factor in the full HELOC payment.

Our instant HELOC, which is what I offer here as our most popular product, allows us to go up to 85% CLTV (combined loan to value), and the lowest rate option there is 8.65 when we take that up to the max LTV, which is the typical request from our customer. They're looking to access as much of that primary or current investment property as possible.

In this example, what we're trying to do here is generate the 20% down payment for that property. So if we're going to generate the 20% down, which is $138,000 in the case of that property that we're looking at, and that takes us up to the 80% combined loan to value. That means the rate is going to be 8.65, and that's going to be a thirty-year fixed rate, instant HELOC there. And the monthly payment for that is going to be 1,075.

So the big item to consider here is there is going to be another 1,075 on top of all the other items for the new home loan that is going to need to be accounted for in the debt-to-income ratio.

Now, this instant HELOC, couple different caveats here. Once you sell the departing residence—in most cases, someone has their property listed for sale or is going to list it for sale, wants to access those funds, and then sell it—you can't do that within the first two months of this loan. Once they give you those funds, they want to earn some interest on those funds. So that is the one catch there.

Other than that, pretty standard HELOC, our most popular request. And we can still pair that with a standard conventional loan. So we're not gonna talk about different loan programs on the new purchase. We're gonna consider everything's gonna be conventional.

So, we have rates as low as 5.99, total discount points there of 2.125. We have a par rate here of 6.624, no cost there. So what we need to consider is that HELOC payment is going to be added to our monthly payment here, along with our tax and insurance, of course, to give our total housing payment. And then, of course, any other credit cards, car payments, etc., are going to go into our DTI. But we were able to execute this deal in this case as long as our customer qualifies, generating that $138,000 down payment and hopefully a little bit more if we need to cover some closing costs.

And in this case, the scenario that we set up again was 760 credit, that standard 80% loan to value in order to purchase that exact home that I pulled up.

Now, what I wanna propose is some alternatives. So again, at Orange County, we love to offer our alternative options. So when we think outside the box, there are quite a few options. We have about a half a dozen different programs that we can offer to execute this bridge.

So, first up, I would say the more popular option—there's a few of these options—is to buy before you sell. So there's a few different names of these programs. Kind of the overarching theme is buy before you sell, and you're going to get a bridge loan.

Now, a lot of these programs are going to solve the main problem that we just encountered of adding a payment to the DTI. So these options are very cool because they allow us to access that equity without hitting our debt-to-income. So in this case, we're again going to generate that 20% down payment, but these are a little bit different.

These ones typically require the current primary to be listed and allow us to access up to 90% loan to value. So a little bit higher than the HELOC as well, and even generate a guaranteed backup offer. So, in this case, a lot of these programs have that ability. There are obviously a few separate fees and costs that go along with that.

If you don't need that option—if you just need the bridge and it is gonna sell on its own—you might not need that guaranteed backup offer. But in the cases where you do, it's amazing.

Now, this program is pretty simple. They're going to charge 9.99% interest per month on the outstanding balance until your original primary home sells, plus a few fees, of course, as well. Now this program has a minimum FICO score of 640 and a maximum DTI of 50%. But the key here is the DTI for the new loan is not affected as that interest charge is accrued. It is not due monthly. So they're just increasing the payoff for your final loan here. They call it instant equity, I believe, on this option.

Now, this strategy allows us to buy that new home—this new home in this case—without affecting the DTI. So if our customer was short on DTI, this would be the best option. Again, the rates are the same here, 5.99 lowest rate for our new purchase.

Of course, once we've generated that down payment at 2.125 discount points, 6.624 rate is our par rate. And now we can just have our monthly payment here. No additional payment added to our debt-to-income ratio, but we still generated the same information here. We generated the down payment, and all those settings there are the same.

Now, the final option I wanna go over is a little more unique, definitely a little more restrictive in some ways, but also open in others. So this is what we call a slight twist on buy before you sell—home equity investment. Basically, we could use that as a bridge, and what it does is if we have a current primary, or a current investment property, or any property in general, this allows an investor, a bank, whatever you want to call them in this case, to give you the down payment.

So we're still gonna generate that 20% down payment in this example and access up to 20% of home equity and LTV limits, of course. But it's not a giant loan. So this doesn't allow access to millions of dollars, but it is a great program. And the big thing is there are no monthly payments, no income requirements, no credit requirements, and no repayment requirements for up to thirty years—you have to repay the loan.

Now, basically, what this does is allows the bank, investor, or whatever you want to call them, to have exposure to the property's appreciation, which is hopefully everybody's goal—or depreciation. So these are very complicated once you get into the numbers, but essentially, once your home appreciates, if you keep this loan for say five years, and your home value goes up by say 20%, this investor is going to add an additional amount to the payoff because they're going to participate in that appreciation that happened since they gave you the funds for that home and are now contributing to the appreciation of that home. They're going to take their portion of that 20% appreciation.

So this one is a little bit tricky. Now, if you're going to sell the home relatively quickly, this is not as scary. Once you start going down the road of having them participate in your appreciation or depreciation over time, you definitely wanna consider that.

So, there's a graph: if the house goes down in value, they also participate in that, so you don't have to pay off as much in those cases. But just consider that this is a very unique and different way to do it, where you may give up some of that upside if you do end up holding that property for a little bit longer than you've expected.

So this allows you to use it as a bridge where you may pay it off in just a few months once you sell that home, or, in this case, it can even go up to thirty years. You just have to be aware of that exposure that you're allowing to some of your appreciation that you may give up in that case.

So, very unique twist on these programs, kind of three different ways to approach it: the traditional HELOC or second lien, whatever you want to call it. There's many ways to access equity in your current properties, whether it's your current primary or current investment properties.

So standard loan way, but we do have to add that to the DTI, or our unique options—home equity investment—they call this one DTI. There are a few different products that offer this, and there are a few different products for the buy-before-you-sell guaranteed backup offer; some other names they call that. So very cool options here.

Hopefully, that helps some of our customers that need just a little bit of extra help for the down payment. A lot of our customers do have record equity in their homes, record equity in the U.S. in their homes.

So if you would like a full quote, please get with our team members or visit our website. We'd be happy to help you out.

We'll get back later this week with another episode of Daily Rates. Thanks, everybody. We'll see you later.