Navigating the real estate market in Idaho can often feel like a high-stakes balancing act, especially when you’re caught between selling your old home and securing your new dream house. This challenge becomes even more daunting in a market where inventory is scarce and prices are soaring. For many Idaho homeowners, it might seem like the only path forward is to sell first, move into a temporary location, and then embark on the hunt for a new home.
However, there’s a strategic solution that might just be the missing piece in this complex puzzle: a bridge loan. Tailored as a short-term financing option, a bridge loan empowers you to leap ahead and purchase your new Idaho home before you’ve sold your current one, smoothing out the transition and keeping you on track toward your real estate goals.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
DISCLAIMER: As a friendly reminder, this post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Idaho, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
Imagine you’ve found your dream home in Idaho, but you’re still waiting to sell your current house. This is where a bridge loan comes into play. A bridge loan is a short-term loan designed to bridge the gap between buying your new home and selling your existing one. It leverages the equity in your current home, providing you with the necessary funds to make a down payment and handle closing costs on your new purchase.
While bridge loans are generally pricier than traditional mortgages, they offer a swift and convenient solution, allowing you to secure your new home without the pressure of selling your old one first.
How does a bridge loan work in Idaho?
In Idaho, a typical situation where you might consider a bridge loan is when you’ve set your heart on a new property but haven’t yet sold your current home. This financial tool taps into your existing home’s equity, providing the funds needed for your new Idaho residence’s down payment and closing costs.
The same lender handling your new mortgage will often manage your bridge loan. They usually require that your current home is actively listed for sale, offering the bridge loan for a period ranging from six months to a year.
A crucial factor in this equation is your debt-to-income ratio (DTI). This ratio will include your existing mortgage payments, the mortgage for your new Idaho home, and potentially the interest-only payments on the bridge loan. However, if your current home is already under contract with a buyer who has secured loan approval, your lender might only consider the mortgage payment of your new home in the DTI calculation.
This consideration is key for lenders to ensure you can comfortably cover payments on both properties should your current home take longer to sell than anticipated.
What are the benefits of a bridge loan in Idaho?
In Idaho, a bridge loan can offer several advantages, making your transition to a new home smoother and more flexible.
- You can make a non-contingent offer on your new home: This strengthens your buying position in a competitive market.
- Only one move is required: Avoid the hassle and cost of temporary housing by moving directly into your new home.
- Prepare your old home for sale at your leisure: More time to make it market-ready can potentially increase its sale value.
- Potential for no payments during the loan period: Some lenders offer this feature, easing your financial burden.
- Act quickly on your ideal property: Secure your new Idaho home without waiting for your current home to sell.
These benefits make a bridge loan an appealing option for Idaho buyers who need financial flexibility before selling their existing home, ultimately using the sale proceeds to settle the bridge loan.
What are the drawbacks of a bridge loan?
While a bridge loan can be a strategic tool in your real estate journey, it’s essential to be aware of its potential downsides:
- Additional loan costs: Expect fees like underwriting and origination, which add to the total cost.
- Increased financial burden: Juggling payments for two mortgages plus a bridge loan can be financially challenging.
- Stricter qualification criteria: Qualifying for a bridge loan can be more challenging than for a traditional mortgage.
- Potentially slower underwriting process: The approval process might take longer than anticipated, affecting your timelines.
- Equity requirements: Lenders assess the equity in your current home. You might not qualify for a bridge loan if you owe more than 80% of its value.
Understanding these drawbacks is crucial in weighing whether a bridge loan is the right choice for your situation.
When is a bridge loan a good solution?
A bridge loan isn’t a one-size-fits-all solution, but it can significantly ease the stress of transitioning between homes in certain scenarios.
- You need your current home’s equity for a new home’s down payment.
- Affording a double move and interim housing isn’t feasible, or bridging sale and purchase timelines is crucial.
- Your ideal home is on the market, and you must act fast to avoid competitive delays.
- Your offers with a home sale contingency are consistently rejected, and you need immediate purchasing power.
- Selling an empty or staged home can be more lucrative and convenient.
- You need the equity you’ve built in your current home to make a down payment on a new one.
- Moving just once is preferable, bridging the gap between selling your old home and buying a new one, avoiding temporary housing.
- You’ve found your dream home and don’t want to lose it in a competitive market, necessitating swift action.
- Your offer is stronger without a home sale contingency, enabling you to buy immediately.
You’re unable to prepare or stage your current home for sale while still living in it, perhaps due to needing significant renovations or the desire to present a blank slate to potential buyers for a better sale price.
What’s required to get a bridge loan in Idaho?
To qualify for a bridge loan in Idaho, you typically need to meet the following criteria:
- Qualifying income: Your lender will assess your income to ensure you can manage payments on your current mortgage, your new mortgage, and potentially an interest-only payment on the bridge loan.
- Sufficient equity: You need at least 20% equity in your current home, though some lenders may require up to 50%.
- Good credit history: A favorable credit score, usually above 650, is often required. This score influences your interest rate and other factors like loan-to-value ratio. Higher scores are always better.
- Your current home listed for sale: Some lenders may need proof that it is on the market, ensuring it’s likely to sell before the bridge loan term ends.
How much does a bridge loan cost in Idaho?
In Idaho, the cost of a bridge loan typically exceeds that of a standard mortgage. Interest rates on bridge loans are generally 1-3 percentage points higher than those for traditional mortgage loans. Additionally, bridge loans may include various transaction fees.
The elevated cost is due to the increased risk lenders take on with bridge loans. It’s important to consider the possibility of your current home not selling within the expected timeframe. If this happens, you should be financially prepared to handle mortgage and bridge loan payments.
The specific rate you’ll be mainly offered depends on your creditworthiness and your chosen lender.
How to reduce bridge loan costs
Applying for a bridge loan with the same lender as your new mortgage can lead to cost savings. In such cases, you might avoid additional underwriting or mortgage fees, as your bridge loan and new mortgage will be processed together.
It’s advisable to compare different lenders and bridge loan options. Remember, bridge loans are meant as a short-term solution. Evaluate what financing option aligns best with your needs, considering the total costs, convenience, and suitability for your situation.
Budget for closing costs
Apart from the loan, you’ll also need to budget for closing costs and other related fees. These typically range from 1.5% to 3% of the loan amount and can include:
- Appraisal fee
- Administration fee
- Escrow fee
- Title policy costs
- Notary fee
- Loan origination fee
Bridge loan cost example
Below is an example of how much a $300,000 bridge loan might cost, along with possible fees.
You find a home you’d like to purchase, but you’re still waiting for your current Idaho house to sell. The asking price for the new home is $500,000. You can only come up with $200,000, but you have at least another $300,000 worth of equity in your current property. You want to access that money to cover the shortfall before selling your new home to another buyer.
| Net loan amount | $300,000 | $300,000 |
| Interest (varies) | 10% (example for 6 months) | $15,000 |
| Origination fee | 1.5% | $4,500 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $700 | $700 |
| Closing cost* | 1% | $3,000 |
| Total repayable amount | $324,200 |
*These closing costs typically range between 1.5%-3%
How Much Is Your Idaho Home Worth Now?
Get a near-instant real estate house price estimate from HomeLight for free. Our tool analyzes the records of recently sold homes near you, your home’s last sale price, and other market trends to provide a preliminary range of value in under two minutes.
Who provides bridge loans in Idaho?
In Idaho, the availability of bridge loans may be more limited due to the specific underwriting requirements associated with this type of loan. If you’re considering a bridge loan, it’s wise to explore options with various lenders. The most common sources for bridge loans in Idaho include:
- Your mortgage lender: Start with the lender of your current mortgage; they might offer bridge loans as part of their services.
- Local banks: Many local banking institutions provide bridge loans, often with competitive terms.
- Credit unions: Member-owned credit unions can be a good source for bridge loans, sometimes offering more favorable rates.
- Hard-money lenders: These are private investors or companies that offer loans based on property value rather than creditworthiness.
- Non-qualified mortgage (non-QM) lenders: These lenders offer loans that don’t meet the strict federal guidelines for mortgages, including bridge loans.
Additionally, modern real estate companies are increasingly facilitating the process of obtaining bridge loans, streamlining the transition between buying and selling homes. More on this will be discussed later in the post.
Are there alternatives to bridge loans in Idaho?
While a bridge loan might not work for every Idaho homeowner’s unique situation, there are alternatives to consider:
- Home equity loan: This kind of loan (sometimes called a HEL) allows you to borrow money using the equity in your home as collateral. Interest rates for a home equity loan can be more expensive than your current rate on your first mortgage, but instead of completing a cash-out refinance (paying off the first mortgage and borrowing cash), you can just borrow the money you need at the higher interest rate and leave your first mortgage at its lower rate.
- Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This allows you to pull money out of your property for a relatively low interest rate. Instead of receiving the money all at once, your lender will extend a line of credit for you to borrow against. You may have to pay an early closure fee if you open this line of credit and close it very soon after. Unlike a home equity loan, HELOCs typically have adjustable interest rates.
- Cash-out refinance: This type of loan lets you pull cash out of your home while refinancing your previous mortgage at the same time. Interest rates are typically higher for these kinds of loans compared to regular refinances, but are lower than those for bridge loans. This is not a solution for everyone, though. For example, you cannot do two owner-occupied loans within one year of one another. This would mean that you might have to wait longer to finance your new purchase with an owner-occupied mortgage using the cash from your cash-out refinance.
- 80-10-10 (piggyback) loan: This option is called a piggyback loan because you would be taking a first mortgage and second mortgage out at the same time to fund your new purchase — this means that you would only need 10% down. For buyers who can’t make as large of a down payment before selling their previous home, this could be a solution that helps them avoid the cost of mortgage insurance. You would, however, still be carrying the cost of three mortgage payments until you sell your current home and can pay off the second mortgage.
- A 401k loan: Borrowing against your retirement account comes with some benefits and drawbacks — your repayment period will be relatively short (up to 5 years), and your monthly payment will likely be high. This could affect your ability to qualify for your new mortgage, as your lender will need to include this monthly payment when calculating your debt-to-income ratio. If your 401k plan allows, you might be able to borrow up to $50,000 to put toward your new purchase.
Are there modern ways to buy a house before I sell?
With today’s technology, there are real estate solution companies like HomeLight that incorporate bridge loans into convenient programs that streamline the process of buying and selling a house simultaneously in Idaho. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you move to a new home, thereby reducing stress and worry.
With your Idaho agent, HomeLight can help you move into your new home with speed and certainty while helping you get the strongest possible offer for your old home. Check with your agent to see if HomeLight Buy Before You Sell is available in your area.
Examples of other “Buy Before You Sell” or home trade-in service companies include Knock, Orchard, Flyhomes, and Homeward.
How does HomeLight Buy Before You Sell work?
Here is how HomeLight’s Buy Before You Sell program works for home sellers in Idaho:
- Talk to a loan officer to get qualified and approved: Find out if your property is a good fit for the program and get your equity unlock amount approved in 24 hours or less. No cost or commitment is required.
- House hunting and close on new home: Once approved, you’ll have access to a portion of your equity in your current home. You’ll be able to submit a competitive offer with no home sale contingency at any time — regardless of how long it takes to find your dream home. Our near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your home.
- Sell your former home with peace of mind: After you move into your new home, work with a top agent to list your unoccupied home on the market to attract the strongest offer possible. You’ll receive the remainder of your equity after the home sells.
HomeLight’s Buy Before You Sell program is available in most states throughout the country.
Benefits of Homelight Buy Before You Sell
- Flexibility in timelines: No need to sync up sale and purchase dates perfectly. This program gives you breathing space to plan your move without feeling hurried.
- Financial peace of mind: Say goodbye to the stress of potential double mortgages or dipping into savings to bridge the gap between homes.
- Enhanced buying power: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
- Up to 13% more home sale earnings: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price, according to data from HomeLight’s 2023 Top Agents Insight Report.
For Idaho homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. Learn more program details at this link.
HomeLight also offers other services for homebuyers and sellers in Idaho, such as Agent Match, which helps you find the top-performing real estate agents in your market, and Simple Sale, a convenient way to receive a no-obligation, all-cash offer to sell your home in as little as 10 days.
You might also try HomeLight’s Net Proceeds Calculator as you plan your home sale.
A creative financing solution for Idaho homeowners
As Idaho homeowners face the challenges of a tight housing market and rising home prices, many are discovering the benefits of bridge loans to streamline buying a new home while selling their old one.
Bridge loans offer the advantage of borrowing against the equity in your previous home, providing a financial cushion for your next purchase. This approach grants you more time to sell your current home, alleviating the stress of perfect timing.
However, while bridge loans can be a highly convenient solution for navigating this transition, they also come with higher costs and may not be suitable for everyone’s financial situation.
For a more streamlined and less uncertain home-buying experience, consider exploring HomeLight’s Buy Before You Sell program. HomeLight can also connect you with a top-performing Idaho real estate agent experienced in handling bridge loans, ensuring you have expert guidance every step of the way.
Header Image Source: (Michael Tuszynsky / Unsplash)
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