Obtaining financing while owning a home can be tricky

Obtaining financing while owning a home can be tricky; however, there are some options to consider before simply letting home buyers walk. Buyers have several options when balancing the sale and purchase of a home and understanding those options might help you seal the deal.

Open a Home Equity Line

Tapping the equity in a currently owned home can be a fast and inexpensive way to gather the funds needed for a new purchase.

HELOC benefits can include:

• Interest only payments for the amount borrowed.
• Competitive HELOC rates with good credit.
• Nominal fee (sometimes free) to open the line.
• Typically no penalty for closing a line early when the property is sold.

Buyers will need to qualify for a new mortgage with the total debt of the existing mortgages and proposed mortgage payment.

Borrowing from a 401K

Borrowing a down payment from a 401k can be a great way to obtain financing; however, while it’s acceptable to make mention of a 401k loan, its best to suggest speaking with a financial expert and HR representative about the advantages and disadvantages of self-financed down payments.

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Apply for a Bridge Loan

Bridge loans bridge the gap between the current home and the purchase of a new home. The loan allows home buyers to tap equity for use as a down payment.

Some bridge loan facts:

• The cost for a bridge financing is more expensive than a line of credit.
• Applicants must qualify for both mortgages.
• Payments may not be required for several months; however, interest will continue to accrue.

Lending guidelines will vary from lender to lender and it’s best to point our clients in the direction of a knowledgeable mortgage professional who can determine the most appropriate financial option.

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