By admin1
What’s required to get a bridge loan in Missouri?
To qualify for a bridge loan in Missouri, you typically need to meet the following criteria:
- Qualifying income: Lenders will assess your income to ensure you can afford payments on your current mortgage, new mortgage, and bridge loan payments.
- Sufficient equity: You need at least 20% equity in your current home, though some lenders may require as much as 50%.
- Good credit history: A favorable credit score, usually above 650, is often required. Your credit score affects your interest rate and other loan terms.
- Your current home listed for sale: Some lenders may need proof that your current home is on the market, ensuring it’s likely to be sold during the bridge loan term.
How much does a bridge loan cost in Missouri?
In Missouri, a bridge loan typically has a higher interest rate than a standard mortgage. You can expect to pay about 1-3 percentage points more than you might for a regular mortgage loan. Additionally, bridge loans often include various transaction fees.
These higher costs are the increased risk taken on by lenders. If your home doesn’t sell within the expected timeframe, and you need to start making payments on your bridge loan, it’s crucial to be financially prepared to handle your mortgage and bridge loan payments simultaneously.
The specific rate you’ll get largely depends on your creditworthiness and the lender you choose.
How to reduce bridge loan costs
Applying for a bridge loan with your new mortgage’s same lender can reduce costs. In such cases, you might not have to pay additional underwriting or other mortgage-related fees, as your bridge loan and new mortgage will be processed together.
It’s advisable to explore different options and compare them. Remember, bridge loans are meant as a short-term solution. Choose what’s cost-effective, convenient, and suitable for your specific situation. We’ll discuss more alternatives in a later section.
Budget for closing costs
Besides the loan, you’ll also need to budget for closing costs and other legal and administrative fees. These typically range from 1.5% to 3% of the loan amount and can include:
Bridge loan cost example
Below is an example of how much a $150,000 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 Missouri house to sell. The new home’s asking price is $270,000. You can only come up with $120,000, but you have at least another $150,000 worth of equity in your current property. You want to access that money to cover the shortfall before selling your new home to another buyer.
| Net loan amount | $150,000 | $150,000 |
| Interest (varies) | 10% (example for 6 months) | $7,500 |
| Origination fee | 1.5% | $2,250 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $700 | $700 |
| Closing cost* | 2% | $3,000 |
| Total repayable amount | $164,450 |
*These closing costs typically range between 1.5%-3%
Who provides bridge loans in Missouri?
In Missouri, while not all financial institutions offer bridge loans due to their specific underwriting requirements, there are several places where prospective borrowers can inquire:
- Your mortgage lender: Start with the lender of your current mortgage; they might offer bridge loans, especially if you have a good payment history.
- Local banks: Many community banks in Missouri provide bridge loans with varying terms and conditions.
- Credit unions: Member-owned credit unions often offer their members competitive rates for bridge loans.
- Hard-money lenders: These lenders can be a source for bridge loans, especially for borrowers looking for more flexible terms.
- Non-qualified mortgage (non-QM) lenders: These lenders offer loans that don’t meet the standard federal guidelines, including bridge loans.
Some modern real estate companies offer services to help you secure a bridge loan, simplifying the transition between buying and selling a home. More details on this will be discussed later in the post.
