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Need to sell one house before you buy another? A bridge loan could help

A bridge loan can enable home buyers to put in an offer for a new house that wouldn't be contingent on the sale of the buyer's existing home having to close, say real estate experts. [Associated Press photo]
Published Jun. 7, 2017

In Tampa Bay's frenetic real estate market, buyers need to move fast when they find a house they like. That can be a problem if they have a house they need to sell.

One solution: a bridge loan.

This week, Ohio-based Third Federal Savings and Loan Association became one of the first lenders to revive a type of loan that fell out of use while millions of Americans owed more than their homes were worth. But now that values have bounced back, a bridge loan enables qualified borrowers to tap the equity in their current home to make the down payment on their next one.

RELATED COVERAGE: Why are there so few mortgages in Tampa Bay these days?

Bridge loans, which are available through Third Federal's five Tampa Bay branches, could be a boon for buyers in the area's tight market, local Realtors say.

"There are a lot of buyers for a lot fewer houses so houses are selling quickly," said Mary Ann Porter, managing broker of Tomlin St Cyr Real Estate Services in Tampa. "If a buyer can qualify for the purchase of a new house by potentially using a bridge loan they don't miss out on what could be their dream home."

Bob Watts, managing broker of Re/Max Metro in St. Petersburg, says buyers who don't need to sell and pay off their current home have a big advantage over those who do.

"That's a very common problem that many of our clients have when they're looking to move up or down because… the seller is not likely to accept (an offer) contingent on the first home selling and closing," Watts said. "A loan product like this can enable us to put in an offer that wouldn't be contingent on the sale having to close."

Here's how Third Federal's bridge loan works:

Borrowers who have at least 20 percent equity in their current house (30 percent if a condo) and meet income and other requirements can borrow up to $250,000 for 12 months at interest as low as 1.99 percent. Payments on the existing mortgage are waived while the borrower buys another house. The new mortgage must be with Third Federal.

The bridge loan "is really to be used as a down payment on the new property," said Shauna Meyer, a Third Federal loan officer. "It's a pretty simple product."

As the nationwide demand for homes increases, bridge loans are just one of a growing variety of loans now available. Fannie Mae, for example, offers a "rehab loan" that allows buyers to purchase or refinance their primary home and renovate it with a single mortgage.

Could the proliferation of loan types mean a return to the crazy lending that led to the 2008 housing crash? Porter doesn't think so.

"We really don't see the same type of lax qualifications that we used to have," she said. "There are too many laws and regulations to keep that from happening."

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.

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