bridge loans

[Wimpy]

I want to buy a house, move my stuff, then sell my old house.  I just heard about bridge loans for exactly that purpose.
 
But they do not seem to be offered by many banks. 
 
Otherwise, how to others move like that?  Does everyone sell their old house first?

[MarvBear]

Welcome to CreditBoards.

[cv91915]

If you have a lot of equity in your current home, you could take out a HELOC or home equity loan and use either of those as a source of down payment for the new place.  

 

Your income would need to support all of your housing costs (payment, taxes, insurance [and HOA and/or PMI, if applicable]) for both homes, as well as the payments on the home equity line/loan, and any other debt payments you have. 

 

DTI limits for the mortgage program on your new home, and not your own assessment of how much debt you can carry, would determine what you could or could not do.

 

[Wimpy]

I got an estimate of my current home's value from the internet and I know how much I owe on my current loan.  I applied for a HELOC for the difference.  But I got rejected for HELOC altogether.

"x Credit Union is unable to grant your request due to:

Excessive Obligations in Relation to Income

Insufficient Collateral"
 
But how do they determine my income?  I am retired and have a decent pension (for a fixed amount each month) and a hefty 401K from which I withdraw from as needed.  They asked for 1099R statements.  That only specifies what I got last year, not how much I am able and willing to withdraw.  
 

[cv91915]

I'm not sure if this is common with HELOCs, but with first mortgages the guidelines will often allow for a formula to be used to impute income from retirement balances based on what you could sustainably withdraw over a period of time, even if you aren't taking the distributions.

 

You might also be able to initiate distributions for X months (I've seen X as low as 1) prior to a new HELOC application, use the monthly income to qualify, and then revert back to the smaller distributions after closing.

 

With that said, the last place I would expect to find safe but creative ways to qualify you for a HELOC is a credit union, so you might also try one of the big banks.  Discuss your reliance on retirement assets in advance and they should be able to advise on feasibility.  

[cv91915]

Another idea, if palatable, is to sell your current home with a lease-back provision, where upon closing the title transfers to the new owner(s) and you become a tenant for X months before they take possession.   

 

The duration and financial terms would be negotiated with the other terms of the sale.

 

That would obviously limit your buyer pool to a certain degree.

Edited February 26, 2021 by cv91915

[Wimpy]

re: HELOC from big banks.
 
Just looked at one: "Due to current market conditions, we are temporarily suspending new applications for home equity lines of credit. Please consider one of the borrowing options below."
 
I will keep looking.

[Wimpy]

re: "so you might also try one of the big banks."
I looked at another bank for HELOC... it requires that you already have mortgage with them in order to apply for HELOC.

[cv91915]

Deleted -- double post 

Edited February 26, 2021 by cv91915

[cv91915]

2 hours ago, cv91915 said:

We have two HELOCs (two different homes).  
 

The one from Chase was opened with no first mortgage on the home at all.
 

DCU did the other HELOC less than a year ago.  On that home we had an existing (but very small) first mortgage that we got got elsewhere.  

 

The HELOC market has been odd during the pandemic, but they're out there.

 

[LashandaHudson]

On 2/25/2021 at 8:27 PM, Wimpy said:

I want to buy a house, move my stuff, then sell my old house.  I just heard about bridge loans for exactly that purpose.
 
But they do not seem to be offered by many banks. 
 
Otherwise, how to others move like that?  Does everyone sell their old house first?

In my opinion, this is a very important topic now. I can recommend Payday App. This is a financial help for everyone including those laid off. Pay attention that everyone has the opportunity to utilize this money loan app that works every day. You can use your smartphone or computer. Payday Say is a loan marketplace that was established in 2013 by a team of enthusiasts.

Edited February 17, 2022 by LashandaHudson

[hegemony]

57 minutes ago, LashandaHudson said:

In my opinion, this is a very important topic now. I can recommend Payday App. This is a financial help for everyone including those laid off. Pay attention that everyone has the opportunity to utilize this money loan app that works every day. You can use your smartphone or computer. Payday Say is a loan marketplace that was established in 2013 by a team of enthusiasts.

 

 

what exactly can this app do in the OP's situation?

[ThomasRMorrison]

On 2/25/2021 at 1:27 PM, Wimpy said:

I want to buy a house, move my stuff, then sell my old house.  I just heard about bridge loans for exactly that purpose.
 
But they do not seem to be offered by many banks. 
 
Otherwise, how to others move like that?  Does everyone sell their old house first?

 

They put their stuff in storage, move, then pull what they need out of storage.

[hdporter]

On 2/25/2021 at 1:27 PM, Wimpy said:

I want to buy a house, move my stuff, then sell my old house.  I just heard about bridge loans for exactly that purpose.
 
But they do not seem to be offered by many banks. 
 
Otherwise, how to others move like that?  Does everyone sell their old house first?

 

Similar to what cv has suggested, in 2019 we bought a house is MA with the intent to relocate, but weren't quite ready to put our GA home on the market.

 

We funded 20% down on the new home with a 5% cash payment and a draw against our existing home HELOC for the 15% balance.  It was first necessary for us to increase the credit line on the HELOC, so we went through appraisals on both our existing house and the home we wanted to buy.

 

To qualify for the mortgage for the new home it was necessary to meet debt ratio requirements under the combined mortgage payment.  Circumstances were such that we were approved with something like a 45% total debt:income ratio.  (Our "actual" debt ratio was smaller than this because substantial bonus/incentive income was excluded due wife's recent job change ... the reason for planned relocation.)

 

Covid complications as well as wife's recent illness have deferred our relocation (she's working remotely).  So, 2 years post purchase, given the decline in mortgage rates, we recently closed on a refi in which we shortened the new mortgage to 15 years (from 30) and rolled in a "modest" remaining balance from the GA mortgage (thanks to a handsome increase in appraised value on the new home).  (The HELOC on our GA home remains outstanding.)

 

At any rate, this is intended to illustrate how one can go about acquiring a new home prior to sale of the existing home.  (btw, all mortgages issued/held through DCU, with whom we've had among the best experience relative to past mortgage financing.)