Navigating the real estate market in Nevada can be a challenging journey, especially when you’re trying to sell your old home and buy a new one simultaneously. This balancing act of timing and funds becomes even more daunting in a market where inventory is low and prices are high.
For many homeowners, it might seem like the only viable option is to sell, move out, and temporarily relocate while searching for that perfect new house. Enter the bridge loan, a potential game-changer for your property transition.
In this post, we’ll explore how a bridge loan could be the key to unlocking your homebuying and selling goals in Nevada.
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 Nevada, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan?
A bridge loan is your stepping stone in the real estate world, especially when you’re in the midst of selling your current home while eyeing a new one. Think of it as a financial bridge that connects the gap between the sale of your existing property and the purchase of your next home.
This type of short-term loan 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 property.
While bridge loans are generally more expensive compared to traditional mortgages, they offer a significant advantage: speed and convenience. They enable you to swiftly secure your new home in Nevada without the pressure of waiting for your old home to sell.
How does a bridge loan work in Nevada?
Imagine you’ve found the perfect new home but haven’t sold your current one yet. A bridge loan steps in here, acting as a financial lifeline in this transitional phase. Here’s a glimpse of how it typically works in such a scenario:
The equity edge: You tap into the equity of your existing Nevada home to fund the down payment and closing costs of your new property. This approach is especially beneficial in Nevada’s tight real estate market, where waiting to sell first could mean losing out on your ideal home.
The entity behind the loan: More often than not, the lender managing the mortgage for your new Nevada home will also extend the bridge loan. They typically require that your current home is on the market and offer the bridge loan for a duration of six months to a year.
The balancing of debt: Your lender will assess your debt-to-income ratio (DTI), taking into account the payments for both your existing mortgage and your new home, along with any interest-only payments for the bridge loan. However, if your existing home is already in the process of being sold, with the buyer’s loan approved, the lender might only consider the mortgage payment of your new home for the DTI calculation.
Lenders want assurance that even if your current Nevada home doesn’t sell immediately, you’re not stretched too thin financially.
What are the benefits of a bridge loan in Nevada?
A bridge loan can provide several advantages that make your Nevada home-buying journey smoother and more flexible:
- Make non-contingent offers: Position yourself strongly in competitive markets by making offers without sale contingencies.
- Single move convenience: Avoid the hassle and expense of multiple moves by transitioning directly to your new home.
- Prepare your old home in peace: Enhance and stage your previous home for sale without the pressures of living there.
- Potential for payment-free period: Some lenders may offer a period without payments, easing financial strain during the transition.
- Act quickly on ideal properties: Secure your dream home fast without worrying about the status of your current home’s sale.
These benefits combine to make bridge loans a strategic solution for Nevada homeowners who need financial flexibility before the proceeds from their home sale become available.
What are the drawbacks of a bridge loan?
While bridge loans offer significant advantages, it’s important to be aware of their potential drawbacks:
- Additional loan costs: Expect to encounter underwriting fees, origination fees, and other associated costs.
- Increased financial pressure: Juggling payments for two mortgages plus a bridge loan, even if it’s interest-only, can be stressful.
- Stricter qualification criteria: Securing a bridge loan often requires more stringent qualifications compared to traditional mortgages.
- Potential for slower underwriting: The underwriting process for bridge loans can sometimes take longer than expected.
- Equity requirements: Lenders assess the equity in your current home. If you owe over 80% of its value, you might not qualify.
Being mindful of these drawbacks is crucial when considering a bridge loan for your real estate needs.
When is a bridge loan a good solution?
A bridge loan can be an ideal solution in specific real estate scenarios, particularly when timing and financial flexibility are key considerations:
- You require the equity from your current home to finance the down payment for a new property.
- Double moving and interim housing costs are unfeasible, making it essential to bridge the sale and purchase timelines effectively.
- Your ideal home is available, and you wish to act swiftly to avoid competitive delays.
- Home sale contingencies in your offers are proving to be obstacles, and you need immediate purchasing power.
- You prefer to sell your home when it’s empty or staged, which is often more lucrative and can simplify the selling process.
- If you’re unable to prepare or stage your current home for sale while still living in it, a bridge loan allows you the flexibility to move out, enhancing your home’s appeal and potentially increasing its market value.
What’s required to get a bridge loan in Nevada?
To secure a bridge loan in Nevada, you’ll need to meet several criteria:
- Qualifying income: Lenders will assess if you can simultaneously handle payments on your current mortgage, your new mortgage, and potentially an interest-only payment on the bridge loan.
- Sufficient equity: At least 20% equity in your current home is essential, though some lenders may require as much as 50%.
- Good credit history: A credit score above 650 is generally necessary, influencing your interest rate and other factors like the loan-to-value ratio. The higher your score, the better the terms you might receive.
- Home listed for sale: Many lenders require evidence that your current home is on the market, ensuring it will likely sell within the bridge loan’s term.
How much does a bridge loan cost in Nevada?
The cost of a bridge loan in Nevada generally exceeds that of a standard mortgage, with interest rates typically 1-3 percentage points higher than those of a traditional mortgage. In addition to higher interest rates, bridge loans often involve extra transaction fees.
This elevated cost reflects the increased risk for lenders, as there’s always the possibility your current home won’t sell within the expected timeframe. In such a situation, it’s crucial to be financially prepared to manage both your mortgage and bridge loan payments concurrently.
Your specific rate will largely depend on factors like your creditworthiness and the type of lender you choose.
How to reduce bridge loan costs
Applying for a bridge loan through the same lender as your new mortgage can cut down on costs. This is because you may not need to pay additional underwriting or mortgage fees, as both your bridge loan and new mortgage will be processed together.
It’s advisable to compare various options, keeping in mind that bridge loans are meant for short-term use. Choose what works best for you in terms of not just the total cost, but also convenience and suitability for your particular situation. We’ll explore more financing options in an upcoming section.
Budget for closing costs
Closing costs and associated legal and administrative fees are additional expenses you’ll need to consider. 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 Nevada house to sell. The new home’s asking price 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 your new home is sold 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 | $675 | $675 |
| Closing cost* | 1.5% | $4,500 |
| Total repayable amount | $325,675 |
*These closing costs typically range between 1.5%-3%
How Much Is Your Nevada 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 Nevada?
In Nevada, not all financial institutions offer bridge loan products due to their unique underwriting requirements. It’s worth exploring a range of lenders to find the most suitable option for your needs. The most common sources for bridge loans include:
- Your mortgage lender: Often, the lender handling your mortgage can also provide a bridge loan.
- Local banks: Many community banks in Nevada offer bridge loans with varying terms and conditions.
- Credit unions: Member-owned credit unions sometimes provide bridge loans as part of their loan portfolio.
- Hard-money lenders: These are private lenders who offer bridge loans, usually at higher interest rates.
- Non-qualified mortgage (non-QM) lenders: These lenders offer loans that don’t meet the standard qualifications of a traditional mortgage, including bridge loans.
Additionally, some modern real estate companies in Nevada specialize in facilitating bridge loans, streamlining the process of bridging the gap between buying and selling a home. We’ll share a popular example later in the post.
Are there alternatives to bridge loans in Nevada?
While a bridge loan might not work for every Nevada 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 might, however, 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 at the same time in Nevada. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you successfully complete your move to a new home, thereby reducing stress and worry.
Together with your Nevada 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 Nevada:
- 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 Nevada 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 Nevada, 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 Nevada homeowners
As homeowners in Nevada face the challenges of a tight housing market and escalating home prices, many are discovering the benefits of bridge loans to streamline the process of buying a new home while selling the old one.
Bridge loans empower you to borrow against the equity in your existing home, easing the financial strain and providing more flexibility in your selling timeline. This financial tool reduces the stress of syncing the sale and purchase of homes, ensuring you don’t rush into decisions.
However, while bridge loans offer convenience during this transition, they might not suit everyone’s financial situation.
For a more streamlined approach, consider HomeLight’s Buy Before You Sell program. It’s designed to alleviate the uncertainties surrounding your next home purchase. HomeLight can also connect you with a highly experienced Nevada-based buyer’s agent who is knowledgeable about bridge loans and can guide you through the entire process.
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