Three lending options to help you move into a new home this spring.
If you’re thinking about upgrading your living situation, you need to think about moving now. Based on how the market is doing, you need to list in May if you’re looking for a late summer move. This begs the question: “What are your loan options for upgrading to a nicer house?” As a lender, I’ve helped tons of homeowners make upgrades. That’s why today, I’ll go over three key situations and how you can approach them:
1. Bridge loans. Most homeowners don’t want to find a third place to stay while they’re moving between two homes. However, most people need to sell their homes to get access to their equity before they can afford a new one. This is where bridge loans come in. A bridge loan is a short-term loan that uses your equity as collateral. Once you have a new home to buy, you can reach out to your lender and apply for up to 80% of the combined value of your old property and your new one. While these loans tend to have higher interest rates, they’re very effective at allowing you to have a smooth transition into your new, nicer home.
“Everyone should consider a 2-1 buydown in this market.”
2. Conventional mortgages. If you don’t have the equity to use a bridge loan or don’t want to risk the higher rates, conventional mortgages are probably your best bet. It is a type of financing that follows guidelines set by Fannie Mae or Freddie Mac and is different from loans backed by the federal government like FHA, VA, or USDA loans. When applying for a conventional loan, your personal credit score and history are important since they’ll determine your interest rate. The key benefit of a conventional loan is that it isn’t risky; your interest rate will probably be lower than it would be with a bridge loan. However, you might have to find temporary housing while moving if you can’t qualify for two mortgages.
3. 2-1 buydowns. No matter which loan option you choose, you should absolutely consider a 2-1 buydown. In case you don’t know, this is a lending product that lowers your interest rate for the first two years of your mortgage. This allows you ease into your mortgage payment, so it’s especially useful for people upgrading their living situations. Plus, you can always refinance when rates eventually fall, so you can take advantage of the lower rate upfront and still reap the benefits when rates come down. If you’re interested in how these work or how you can get your seller to pay for yours, just reach out.
As always, don’t hesitate to call or email me if you have any questions about today’s topic. I’d love to give you more tips and information on how you can have the smoothest sale possible this spring!
