By admin1
What’s required to get a bridge loan in Utah?
If you’re a Utah homeowner thinking about a bridge loan, it’s important to know what it takes to qualify. While each lender has its own rules, here are the general guidelines for getting a bridge loan in Utah:
- Qualifying income: Lenders will evaluate your income to ensure you can manage payments for both your existing and new mortgages, along with potential interest-only payments on the bridge loan.
- Sufficient equity: Generally, you should hold a minimum of 20% equity in your existing property. However, it’s not uncommon for some Utah lenders to stipulate up to 50% equity.
- Good credit history: A respectable credit score, typically hovering above 650, is a common requirement. This score not only determines your eligibility but can also influence associated terms like interest rates and the loan-to-value ratio. If you’ve been diligent with your current mortgage payments, it might be worth inquiring with your existing lender about their bridge loan offerings.
- Currently listed home: Some Utah lenders mandate that your current residence be actively listed for sale, ensuring it’s likely to be sold within the bridge loan’s duration.
How much does a bridge loan cost in Utah?
A bridge loan in Utah often has a steeper interest rate than conventional mortgages. It’s not uncommon to see rates that are 1 to 3 percentage points higher than those of a standard mortgage. Additionally, there could be more transaction fees associated with bridge loans. This cost premium reflects the increased risk posed to lenders.
If your current home takes longer to sell than expected, you could end up juggling both your mortgage and the bridge loan. That’s why it’s important to make sure you can handle overlapping payments without stress.
The exact rate you’re offered hinges on your credit profile and the specific lender you engage with.
How to reduce bridge loan costs
Teaming up with the same lender for both your bridge loan and your new mortgage might cut down on some costs. Typically, this approach eliminates the need for separate underwriting fees or additional mortgage-related expenses, given that both loans would be processed simultaneously.
Shopping around can also be beneficial. By comparing various offers, you not only gain insight into the associated costs but also gauge the convenience and suitability of each option. We’ll share additional options in an upcoming section.
Budget for closing costs
When factoring in the overall cost of a bridge loan in Utah, don’t overlook closing costs and other associated fees. These expenses typically range from 1.5% to 3% of the total loan amount and might include:
Bridge loan cost example
Below is an example of how much a $300,000 bridge loan might cost, along with possible fees.
Let’s say you find a home you’d like to purchase, but you’re still waiting for your current Utah 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 | $700 | $700 |
| Closing cost* | 2% | $6,000 |
| Total repayable amount | $327,200 |
*These closing costs typically range between 1.5% to 3%
Who provides bridge loans in Utah?
Not every lender in Utah offers bridge loans because of the extra underwriting involved. If you’re interested, it’s smart to shop around and talk to a few different lenders before applying. Common places to find bridge loans in Utah include:
- Your mortgage lender: Reach out to your current mortgage lender. They’re more likely to facilitate an easier application process since you’re already a client.
- Local banks: These financial institutions offer personalized services and specialized products catering to the current trends in the Utah real estate market.
- Credit unions: These member-owned institutions often provide competitive rates and may offer more flexible lending requirements.
- Hard-money lenders: Hard-money lending companies in Utah consider the property value instead of the applicant’s credit score when granting loans.
- Non-qualified mortgage (non-QM) lenders: These institutions don’t adhere to strict federal mortgage guidelines. It’s a viable solution if you don’t qualify for traditional financing.
In addition to these traditional sources, there are modern real estate companies in Utah with streamlined bridge loan processes. These firms can effortlessly connect you with a suitable short-term loan, bridging the financial divide between buying and selling a home. We’ll share how this works later in this post.
