Bridge loan, or how are people moving up these days?

[WarChestSM]

When out to dinner with friends who are thinking about trading up from their condo, I was told that bridge loans don’t really exist anymore. I dug around a bit on the net and saw some conflicting info but it seems bridge loans may be pretty difficult to get nowadays. If this is true, how are people dealing with financing when the timing of the purchase of a new property and sale of existing property don’t quite line up.

Attractive properties have so many offers that its hard to think you are gunna be able to purchase with the “contingent on sale of existing property” clause thrown in…

They were even talking about selling their place and then renting for a bit while they shop for a trade up place to buy. I thought, “total madness there must be a better way”.

[joec]

I would guess nearly everyone in easy to sell areas would definitely throw out offers which have a sale of existing property contingency.

Just seems like a mess to have to deal with that.

I’d suggest just selling and renting if they really “NEED” to move to something bigger.

[CA renter]

[quote=joec]I would guess nearly everyone in easy to sell areas would definitely throw out offers which have a sale of existing property contingency.

Just seems like a mess to have to deal with that.

I’d suggest just selling and renting if they really “NEED” to move to something bigger.[/quote]

Agree with this.

We were talking to another couple last night about this very same thing. In this market, the best option would probably be to sell and then rent. Might also be able to time things better WRT seasonal buying, too, by selling in late winter/spring and then buying in late fall/early winter. You also know exactly how much money you will have, as well. Lots of people don’t really understand how much money gets sucked out of each transaction when you sell, not to mention the fact that one might not get their “wishing price” when they sell. What looks like a lot of equity might end up being quite a bit less once everything is netted out.

[spdrun]

Sell by owner or by flat-fee broker and parasitic transaction costs go waaaay down 🙂

[plm]

I think its too much of a hassle to sell and rent first. Best to save enough for a down payment to not have to sell first. If you can afford higher payments for a move up home, you should be saving quite a bit each month already.

[SD Realtor]

WarChest there are plenty of bridge loans out there. However these loans are only made if there is a significant amount of money down. Also they have to be a primary loan so nothing is in front of them from a lien standpoint. Usually a minimum of 35 – 40% ltv is required.

[poorgradstudent]

Even better than Sell-and-Rent is “Sell-and-live-with-relatives-until-you-Buy”

That’s what the people who we bought our home from ended up doing, and something we’ll consider if we decide to move up in 5-10 years.

[CA renter]

[quote=poorgradstudent]Even better than Sell-and-Rent is “Sell-and-live-with-relatives-until-you-Buy”

That’s what the people who we bought our home from ended up doing, and something we’ll consider if we decide to move up in 5-10 years.[/quote]

Definitely a smart thing to do if you can work it out.

[UCGal]

[quote=plm]I think its too much of a hassle to sell and rent first. Best to save enough for a down payment to not have to sell first. If you can afford higher payments for a move up home, you should be saving quite a bit each month already.[/quote]

It’s not just the down payment – it’s the debt to income ratio. Most folks don’t qualify for 2 simultaneous mortgages where neither property has rental income to offset the mortgage.

[plm]

I was thinking that the lender would take into account the rental income but I guess that wouldn’t work since it would start a month later. Perhaps you would have to pay off the house first which would be rather difficult.

[spdrun]

I think some lenders take prospective rental income into account (must be “rental ready”). But those usually require a bit of experience with rental property as well.

[WarChestSM]

*Update*

Went to lunch with another buddy I hadn’t seen in a while. He and his wife faced a similar situation of owning a condo and wanting to move up. They listed their place and quickly sold it to an all cash buyer who then leased it back to them while they looked for another property to buy. It worked out and they bought a house…but still, seems risky and I don’t like the idea of being out of the market and hoping/needing a good place to come up for sale in a short period of time.

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