The nation’s second largest mortgage lender has launched a new bridge loan product to help buyers move before selling their existing home.
It allows them to tap into their often enormous amount of equity while avoiding having to make a contingent offer.
This could improve their odds of a winning bid, as sellers will typically favor their offer over others that require the sale of the departing residence.
Of course, it merely buys them some time and eventually they’ll need to sell their old home to pay back the loan.
But it is yet another option for those looking to move, especially in markets that continue to experience tight inventory.
Rocket Mortgage Bridge Loan Provides Up to Six Months to Sell
The new bridge loan from Rocket Mortgage makes it easier to buy before selling your existing home by unlocking home equity prior to a sale.
That money can then be used to fund the down payment on the new purchase, and/or go toward closing costs on the new loan.
There are lots of move-up home buyers with a ton of home equity thanks to rapidly rising home prices and record low mortgage rates, which increased the speed of principal repayment.
But you don’t have access to that equity unless you took out a home equity loan or a HELOC.
The bridge loan gives you access to some of that money to put toward the home purchase while you attempt to sell your existing residence.
Once sold, you can use the proceeds to pay off the bridge loan and move on with your life.
However, there are several requirements needed to get one of these loans, the most important being that you need to take out an associated purchase loan from Rocket Mortgage.
Along with that, you must have your home listed for sale, be under contract with a listing agent, or have a guaranteed buyout agreement in place.
You must also be selling a one-unit primary residence and purchasing a primary residence as well.
There is a minimum 740 FICO score requirement, a maximum 45% DTI ratio permitted, and the max LTV/CLTV is 80%, meaning you need a good amount of equity to keep a 20% buffer.
One perk to a bridge loan is the bridge loan payment is typically excluded from your home purchase loan DTI as it’s paid off via the home sale proceeds.
Rocket Mortgage’s bridge loan provides up to six months of interest-only payments while you attempt to sell your old home.
If you’re unable to, the bridge loan must still be paid back. So there’s a risk there, and you really need to be motivated to sell, even if it buys you a bit more time.
The upside is if you sell quickly, you only pay interest for the months you had the bridge loan in place.
This can be handy as bridge loans typically have much higher interest rates than other types of mortgages and home equity options.
Speaking of, an alternative to a bridge loan is taking out a home equity loan or HELOC and using some of the funds for a down payment on the replacement home.
It provides a bit more flexibility if your old home doesn’t sell immediately for whatever reason.
Also note that other mortgage lenders out there offer bridge loans too, so you need to shop both the bridge loan rate and terms and those of competitors to see who can offer the best deal.
Long story short, you won’t want to pay more for your permanent financing just to get a bridge loan.
Rocket Mortgage Bridge Loan Requirements
• Existing home must be under contract, listed for sale, or buyout agreement in place
• Must be a one-unit primary residence
• Must be buying a primary residence
• Must use Rocket Mortgage for the new home purchase loan
• Must have a 740+ FICO score
• Maximum DTI ratio is 45%
• Maximum LTV/CLTV is 80%
• Bridge loan term is a maximum of six months
• Interest-only payments can be made during that time
• Funds can be used to cover down payment, closing costs, or to pay off current mortgage
(photo: Andrew Kearns)
