Arkansas’s “Purchase Before Sale” Bridge Loan Can Unlock Your Home Equity

At the same time, buying and selling homes has brought many difficulties to Arkansas homeowners. Apart from the timeline where it is nearly impossible to synchronize two transactions due to many dependencies, you are worried that there is not enough money to buy while waiting for the current transaction. Most importantly, it is possible to move twice – first enter a temporary location and then again enter your dream home.

But what if there is a sleeker way to navigate this transition? Consider bridge loans, a short-term financial solution designed to bridge the gap. A bridge loan allows you to buy your next Arkansas home before selling your current loan and provides a lifeline to align your real estate dream with reality.

Disclaimer: This article is intended for educational purposes, not financial advice. If you need help with using a bridge loan in Arkansas, Homelight will encourage you to contact your own consultant.

What is a simple bridge loan?

A bridge loan is a short-term loan that provides you with the necessary funds to purchase a new home before you sell your existing home. It uses equity in the current home as leverage, giving you the cash you need to pay down payment and paying for the closure of a new property.

Think of bridge loans as temporary financial solutions. It effectively “bridges” the gap between selling your current home and buying a new home, thus easing the pressure on timing and financial constraints.

Typically, bridge loans are short-lived and last from six months to one year. Remember that bridge loans are often higher than traditional mortgages due to their short-term nature and the risks involved. However, they can be a valuable tool to ensure a seamless transition to your new home in Arkansas.

How does Bridge Loan work in Arkansas?

Bridge loans provide fluid transitions so you can move forward without having to wait for your old goods to sell a new Arkansas home.

Typically, the lender that fundes your new home will also offer bridge loans. They usually require that your current home be actively sold and offer bridge loan terms from six months to one year.

A key factor in this process is your debt-to-income ratio (DTI). The lender will calculate your DTI by considering the payment for your existing mortgage, the new mortgage payment for the home you are purchasing, and any interest-only payment for the Bridge Loan.

However, if your old home is already in contractual status and the buyer loan approval is completed, some lenders can only state your new mortgage in the DTI calculation. These considerations help ensure you can manage payments on both properties comfortably and provide a safety net if your current home is not selling immediately.

What are the benefits of bridge loans in Arkansas?

Getting a bridge loan in Arkansas has several advantages that can make the home purchase experience more flexible and less stressful.