A ‘Buy Before You Sell’ Bridge Loan in Arkansas Unlocks Your Home Equity

To qualify for a bridge loan in Arkansas, you’ll typically need to meet the following criteria:

• Qualifying income: Lenders will assess your income to ensure you can handle payments on your existing mortgage, new mortgage, and any bridge loan payments.
• Sufficient equity: You need at least 20% equity in your current home, though some lenders might require up to 50%.
• Good credit history: A favorable credit score, usually above 650, is needed. This influences your interest rate and other factors like loan-to-value ratio.
• Current home listed for sale: Many lenders require proof that your existing home is on the market, ensuring it’s likely to be sold before the bridge loan term ends.

How much does a bridge loan cost in Arkansas?

A bridge loan in Arkansas typically comes with a higher interest rate compared to a traditional mortgage. You can expect the interest rate to be about 1-3 percentage points higher than what you might get on a standard mortgage loan. Additionally, bridge loans often involve various transaction fees.

This higher cost is due to the increased risk for lenders, as there’s always a chance your home may not sell within the anticipated timeframe. If that happens, you’ll need to be financially prepared to cover both your mortgage and bridge loan payments. The specific interest rate you receive will largely depend on your credit score and the lender you choose.

How to reduce bridge loan costs

One way to potentially lower the costs associated with a bridge loan is to apply for it with the same lender as your new mortgage. In this scenario, you may not need to pay additional underwriting or other mortgage fees, as both your bridge loan and new mortgage will be processed together.

It’s also beneficial to shop around and compare different lenders. Remember that bridge loans are meant as a short-term solution. Evaluate all your financing options not just by their total costs, but also by how well they fit your specific situation and the level of convenience they offer. We’ll explore more financing options in a later section.

Budget for closing costs

In addition to interest and fees, you’ll also have to budget for closing costs, which typically range from 1.5% to 3% of the loan amount. These may 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 $200,000 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 Arkansas house to sell. The new home’s asking price is $300,000. You can only come up with $100,000, but you have at least another $200,000 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.

*These closing costs typically range between 1.5%-3% 

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Who provides bridge loans in Arkansas?

In Arkansas, the availability of bridge loan providers may be limited due to the specialized underwriting these loans require. However, there are several sources you can explore:

• Your mortgage lender: Often the first stop for inquiring about a bridge loan.
• Local banks: They may offer bridge loans with varying terms.
• Credit unions: Known for customer-centric services, they might provide more favorable terms.
• Hard-money lenders: Useful for quick approvals, though often at higher interest rates.
• Non-qualified mortgage (non-QM) lenders: They cater to unique or unconventional loan needs.

Additionally, some modern real estate companies offer services to help you find a bridge loan as part of their homebuying and selling solutions. We’ll share how this works later in this post.

While a bridge loan might not work for every Arkansas 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 of 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 Arkansas. 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 Arkansas 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 Arkansas:

1. Apply in minutes with no commitment: 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.

2. Buy your dream home with confidence: Once you’re 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 current home.

3. Sell your current home with peace of mind: After you move into your new home, we will 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.

For Arkansas 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 Arkansas, such as Agent Match to 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 Arkansas homeowners

As Arkansas homeowners face the challenges of a tight housing market and high home prices, bridge loans are emerging as a viable solution to ease the process of buying a new home while selling the old one.

By leveraging the equity in your previous home, bridge loans provide the financial flexibility to make your new home purchase more manageable, giving you the breathing room needed to sell your old home without the pressure of perfect timing.

However, while bridge loans offer convenience in this transitional phase, they can be expensive and may not be suitable for everyone’s financial situation.

For a streamlined and simplified approach, consider HomeLight’s Buy Before You Sell program. This innovative option can remove much of the uncertainty from your homebuying journey. Additionally, HomeLight can connect you with experienced Arkansas buyer’s agents who are well-versed in the nuances of bridge loans, further easing your path to your new home.

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