Bridge Loans in Virginia: How to Unlock Home Equity to Buy Before You Sell
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Cheyenne Wiseman Associate EditorClose
Cheyenne Wiseman Associate EditorCheyenne Wiseman is an Associate Editor at HomeLight.com. Previously, she worked as a writer for Static Media (Mashed.com and Chowhound.com) and as an editor for CBR.com. Cheyenne holds a bachelor’s degree in English from UC Davis, where she also founded and led a literary magazine called Open Ceilings. She has four years of experience writing and editing on topics including real estate, financial advising, and pharmaceuticals.
Buying a new home while trying to sell your current one can be challenging, especially when you’re attempting to line up both transactions. In a competitive Virginia market, where desirable homes can move quickly, many homeowners worry about selling too soon or missing out on their next purchase.
You might assume you need to sell first and find temporary housing while searching for your next home, but that’s not your only option.
A bridge loan can help cover the gap between buying and selling, giving you access to funds from your current home’s equity before it sells. With this short-term financing solution, you may be able to purchase your next home with greater flexibility and less pressure. In this guide, we’ll explain how a bridge loan in Virginia works, its potential benefits and drawbacks, and alternative options to consider.
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.
What is a bridge loan, in simple words?
A bridge loan is a short-term financing option that can help you purchase a new home before your current one sells. It allows you to tap into the equity you’ve built in your existing property and use those funds toward a down payment, closing costs, or other expenses related to your next home purchase.
Because bridge loans are intended to provide fast access to funds and added flexibility, they often carry higher costs than a traditional mortgage. Even so, many Virginia homeowners find the trade-off worthwhile if it helps them avoid a rushed sale, a contingent offer, or a temporary move between homes.
Bridge loans are also sometimes called:
- bridge financing
- bridging loan
- interim financing
- gap financing
- swing loans
How does a bridge loan work in Virginia?
One common situation where a bridge loan can help is when you’ve found a new home in Virginia but haven’t yet sold your current property. In that case, you can use the equity in your existing home to help fund the down payment and closing costs on your next purchase.
In many cases, the lender providing your new mortgage may also offer a bridge loan. Lenders often require your current home to be listed for sale and typically structure the bridge loan with a term of six months to one year.
To determine eligibility, the lender will review your debt-to-income ratio, which may include your existing mortgage payment, your new mortgage payment, and any bridge loan payments.
If your current home is already under contract and the buyer’s financing is fully approved, the lender may only factor in the new mortgage payment. This helps reduce risk and confirms that you can comfortably manage your obligations if the sale of your existing home takes longer than expected.
What are the benefits of a bridge loan in Virginia?
Here are a few ways a bridge loan in Virginia can help make your move smoother:
- You can make a non-contingent offer: Sellers often prioritize buyers without home sale contingencies.
- You only have to move once: Skip the hassle and costs of temporary housing or storage.
- You can prep your old home: Move out first, then focus on preparing your home with staging and repairs.
- No payments during the loan period: You may not owe anything until your previous home sells.
- You can act quickly on the right property: Make an offer without stressing about selling first.
What are the drawbacks of a bridge loan?
A bridge loan can make it easier to buy before you sell, but there are some trade-offs to keep in mind.
- Higher borrowing costs: Bridge loans often come with origination fees, closing costs, and interest rates that are higher than those of traditional mortgages.
- Multiple housing payments: Depending on your situation, you may need to manage your current mortgage, your new mortgage, and bridge loan payments at the same time.
- Stricter qualification standards: Lenders may require stronger credit, more equity, or additional financial documentation than they would for a standard mortgage.
- More complex approval process: Because the lender is evaluating two properties and multiple sources of financing, approval can take longer than expected.
When is a bridge loan a good solution?
While bridge loans aren’t right for everyone, they can be useful in situations where timing is critical.
A bridge loan may make sense if:
- You need to access the equity in your current home to fund a down payment on your next one.
- You want to avoid the expense and inconvenience of moving into temporary housing between homes.
- You’ve found a home you love and need to act quickly in a competitive market.
- Sellers have rejected your offers because they included a home sale contingency.
- You’d prefer to move out before listing your current home so you can complete repairs, staging, or showings more easily.
What’s required to get a bridge loan in Virginia?
Bridge loan requirements vary by lender, but you’ll typically need:
- Sufficient income: Lenders will evaluate whether you can comfortably handle payments associated with your current mortgage, new mortgage, and bridge loan.
- Adequate home equity: Many lenders require at least 20% equity in your current home, though some may require more.
- Strong credit: A solid credit history can improve your chances of approval and help you secure better loan terms.
- A plan to sell your current home: Some lenders require your home to be actively listed for sale or otherwise demonstrate a clear exit strategy for the bridge loan.
How much does a bridge loan cost in Virginia?
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 Virginia house to sell. The new home’s asking price is $400,000. You can only come up with $100,000, 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 | $700 | $700 |
| Closing cost* | 1.7% | $5,100 |
| Total repayable amount | $326,300 |
*These closing costs typically range between 1.5%-3%
What's Your Current Home Worth?
As you make plans to buy a new home, get a value estimate on your current house from HomeLight for free. Our tool analyzes 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 Virginia?
Due to the underwriting demands for this type of loan, few institutions in Virginia offer bridge loan products. Curious borrowers may want to check with several different lenders before applying. The most common sources include:
- Your mortgage lender
- Local banks
- Credit unions
- Hard-money lenders
- Non-qualified mortgage (non-QM) lenders
Are there alternatives to bridge loans in Virginia?
While a bridge loan can be a useful tool, it isn’t the right fit for every Virginia homeowner. Fortunately, there are several alternatives worth considering:
- Home equity loan: This kind of loan (sometimes called a HEL) allows you to borrow against the equity in your current home. While the interest rate may be higher than the rate on your existing mortgage, you can access the funds you need without refinancing your first mortgage and potentially giving up a lower rate.
- Home equity line of credit (HELOC): A HELOC also lets you tap into your home’s equity, but instead of receiving a lump sum, you’ll have access to a revolving line of credit. Interest rates are often relatively competitive, though they are usually variable. Some lenders may charge an early closure fee if the account is paid off shortly after opening.
- Cash-out refinance: With a cash-out refinance, you replace your current mortgage with a larger one and receive the difference in cash. Rates are typically lower than bridge loan rates but may be higher than those offered through a standard refinance. Depending on your circumstances, timing restrictions could make this option less practical for buyers planning another owner-occupied purchase soon.
- 80-10-10 (piggyback) loan: This option is called a piggyback loan because it involves combining a first mortgage and a second mortgage to help finance a new home purchase with as little as 10% down. It can help buyers avoid private mortgage insurance, though you’ll likely be responsible for multiple loan payments until your current home sells.
- A 401(k) loan: If your retirement plan permits, you may be able to borrow against your 401(k). While this can provide quick access to funds, repayment periods are often short and monthly payments can be substantial, which may affect your ability to qualify for a new mortgage.
Are there modern ways to buy a house before I sell?
Today, real estate technology companies such as HomeLight offer programs designed to simplify buying and selling a home at the same time. These “Buy Before You Sell” solutions build on the concept of a bridge loan while offering additional flexibility throughout the process.
Working alongside your Virginia real estate agent, HomeLight can help you access equity from your current home so you can move forward with a new purchase before selling. The goal is to create a smoother transition while reducing many of the common timing challenges associated with buying and selling simultaneously.
Other companies offering similar “Buy Before You Sell” or home trade-in programs include Knock, Orchard, Flyhomes, and Homeward.
How does HomeLight Buy Before You Sell work?
Here’s how HomeLight’s Buy Before You Sell program works for home sellers in Virginia:
- Apply in minutes with no commitment: Find out whether your property qualifies and receive an equity unlock estimate, often within 24 hours. There is no cost and no obligation to move forward.
- Buy your dream home with confidence: Once approved, you can access a portion of your available equity and submit a competitive offer without a home sale contingency. The program’s Equity Unlock Calculator can help estimate how much equity may be available.
- 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. Once the sale closes, you’ll receive the remaining equity from the transaction.
Benefits of Homelight Buy Before You Sell
- Timing flexibility: You don’t have to perfectly coordinate the sale of one home with the purchase of another, giving you more room to plan your move.
- Financial peace of mind: The program can help reduce concerns about carrying multiple housing costs or using personal savings to bridge the gap.
- Stronger buying position: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
- Potential for a higher sale price: Once you’ve moved out, your previous home can be listed vacant and possibly staged, which may help it sell for more, according to HomeLight transaction data.
For Virginia homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. Learn more about the program at this link.
HomeLight also offers other services for homebuyers and sellers in Virginia, 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 7 days.
You might also try HomeLight’s Net Proceeds Calculator as you plan your home sale.
A creative financing solution for Virginia homeowners
As home prices remain elevated and competition remains strong in many Virginia markets, some buyers are exploring bridge loans and other financing options to make a move before selling their current home.
A bridge loan can provide access to your existing home equity, allowing you to secure your next property while giving your current home time to sell. For many homeowners, that added flexibility can reduce the pressure of coordinating two major transactions at once.
That said, bridge loans aren’t the best fit for every situation. Programs such as HomeLight’s Buy Before You Sell may offer a simpler path for homeowners who want additional flexibility during their move. HomeLight can also connect you with a top-performing Virginia agent experienced in helping clients evaluate bridge loans and other buy-before-you-sell options.
Editor’s note: 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 Virginia, HomeLight encourages you to reach out to your own advisor.
Header Image Source: (Matt Hardison/Unsplash)
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