Bridge Loans in Atlanta: How to Unlock Home Equity to Buy Before You Sell

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Selling your Atlanta home while looking to purchase a new one can be tricky. Lining up the sale of your current home while trying to close the deal on a new one, particularly in a competitive market where inventory is low, may feel impossible.

You might think your only choice is to sell your current home, move into temporary housing, and hope your future home becomes available without delay.

However, there’s one financial tool you probably haven’t considered – a bridge loan. A bridge loan is a short-term financing solution, giving you the necessary income to purchase a new home, even before you’ve sold your current one.

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 Atlanta, HomeLight encourages you to reach out to your own advisor.

What is a bridge loan, in simple words?

A bridge loan is a practical, short-term financing solution designed to “bridge the gap” for homeowners like you. This type of loan leverages the equity in your existing home, providing you with the necessary funds for a down payment and to cover the closing costs of your new property.

While bridge loans generally carry higher costs than traditional mortgages, they offer a quick path to purchase your new home without the wait and uncertainty of selling your old home first.

How does a bridge loan work in Atlanta?

Imagine you’ve found your dream home in Atlanta but haven’t sold your current house yet. This is where a bridge loan comes into play. It uses the equity from your previous home to cover the down payment and closing costs for your new home, acting as a financial bridge between the two transactions.

The same lender handling your new mortgage will usually manage your bridge loan. They’ll expect your existing home to be on the market, offering the bridge loan for a period ranging from six months to a year.

An important aspect of this arrangement is your debt-to-income ratio (DTI). This calculation will include the mortgage on your old house, the mortgage on your new Atlanta home, and any interest-only payments on the bridge loan. If your old home is already under contract with a buyer who has secured loan approval, your lender might consider only the new mortgage payment in the DTI calculation.

Lenders use this approach to ensure that you can comfortably manage payments on both properties in case the sale of your old home takes longer than expected.

What are the benefits of a bridge loan in Atlanta?

Bridge loans offer several advantages, making them a smart choice for Atlanta homebuyers in transition:

  • Make a non-contingent offer on your new home
  • Only need to move once
  • Can prepare your old home for sale after moving out, including staging
  • Some lenders offer no payments during the loan period
  • Quickly move on the right property without waiting for your current home’s sale

What are the drawbacks of a bridge loan?

While bridge loans can be beneficial in certain scenarios, they also come with potential downsides:

  • Additional loan costs like underwriting and origination fees
  • Financial stress from managing up to two mortgages plus a bridge loan simultaneously
  • More challenging qualification criteria compared to traditional mortgage loans
  • Slower underwriting process than expected

Moreover, the equity in your current home plays a significant role in qualifying for a bridge loan. If you owe more than 80% of your home’s value, you might face difficulties securing a bridge loan.

When is a bridge loan a good solution?

A bridge loan might be the right choice in certain situations:

  • You need the equity from your current home for a down payment for a new home.
  • You want to avoid a double move, interim housing costs, and the overall hassle.
  • Your dream home becomes available, and you want to act fast to avoid missing out.
  • Overcoming challenges where your home sale contingency has hindered your purchasing ability.
  • Desiring to sell a staged home can be more profitable and appealing to buyers, especially if you cannot prepare or stage your current home for sale while still living in it.

What’s required to get a bridge loan in Atlanta?

To qualify for a bridge loan in Atlanta, you typically need the following:

  • Qualifying income: Your lender will assess your income to ensure you can handle payments on your existing mortgage, the new mortgage, and possibly an interest-only payment on the bridge loan.
  • Sufficient equity: At least 20% equity in your current home is needed, though some lenders may ask for up to 50%.
  • Good credit history: A good credit score, usually above 650, is required. This score influences your interest rate and other factors, like the loan-to-value ratio. Checking with your current mortgage lender is beneficial, especially if you have a solid payment history.
  • Your home listed for sale: Some lenders may need proof that your current home is on the market, ensuring it will sell before the bridge loan term ends.

How much does a bridge loan cost in Atlanta?

A bridge loan in Atlanta typically has a higher interest rate than a standard mortgage. You can expect interest rates to be about 1-3 percentage points higher than a traditional mortgage loan. In addition to the increased interest, bridge loans often incur extra transaction fees.

The higher cost is due to the increased risk for lenders, as there’s a chance your current home might not sell within the expected timeframe. This risk means you should be financially prepared to manage your mortgage and bridge loan payments simultaneously, should this situation arise.

The specific rate you’ll get depends largely on your creditworthiness and the lender you choose.

How to reduce bridge loan costs

If your bridge loan and new mortgage are through the same lender, you might not incur additional underwriting or mortgage fees. These loans will likely be underwritten and approved simultaneously. It’s beneficial to compare different options, as bridge loans are meant to be a temporary solution. Consider the cost, convenience, and suitability for your situation.

Budget for closing costs

Be prepared to cover closing costs and various legal and administrative fees. These costs typically range from 1.5% to 3% of the loan amount and may include:

  • Appraisal fee
  • Administration fee
  • Escrow fee
  • Title policy costs
  • Notary fee
  • Loan origination fee

These expenses are an important consideration when budgeting for your bridge loan in Atlanta.

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 Atlanta house to sell. The new home’s asking price is $400,000. You can only come up with $200,000, 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.

Net loan amount $200,000 $200,000
Interest (varies) 10% (example for 6 months) $10,000
Origination fee 1.5% $3,000
Underwriting fee $1,000 $1,000
Appraisal fee $700 $700
Closing cost* 2% $4,000
Total repayable amount  $218,700

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

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Who provides bridge loans in Atlanta?

Not all financial institutions in Atlanta offer bridge loan products due to their specific underwriting requirements. If you’re considering a bridge loan, exploring your options with various lenders is a good idea. The most common sources for bridge loans in Atlanta include:

  • Your mortgage lender
  • Local banks
  • Credit unions
  • Hard-money lenders
  • Non-qualified mortgage (non-QM) lenders

Additionally, there are real estate companies that specialize in facilitating bridge loans, helping to bridge the gap between buying and selling a home. We’ll delve into how these companies operate later in this post.

Are there alternatives to bridge loans in Atlanta?

While a bridge loan might not work for every Atlanta 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 Atlanta. 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 Atlanta 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 Atlanta:

  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.

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.
  • Sell for up to 10% more: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price, according to HomeLight transaction data.

For Atlanta 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 Atlanta, 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 Atlanta homeowners

As Atlanta homeowners face the challenges of a tight housing market and rising home prices, many are discovering that bridge loans offer a streamlined approach to managing the intricacies of buying a new home while selling the old one.

Bridge loans enable you to borrow against the equity in your previous home, affording you the flexibility and time to sell without the pressure of synchronizing every detail perfectly. This financing option can significantly reduce the stress of the transition, giving you breathing room to focus on finding your ideal new home.

However, it’s important to remember that bridge loans, while convenient, may not be the ideal solution for everyone due to their cost and specific requirements.

For an alternative, consider exploring HomeLight’s Buy Before You Sell program. This innovative approach aims to ease the uncertainty of your next home purchase.

Additionally, HomeLight can connect you with a top Atlanta real estate agent who has expertise in bridge loans and other financial solutions, ensuring you make the best decision for your unique situation.

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