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Bridging the Gap. Quick Decisions. 

Many homebuyers find themselves caught in the middle between selling their existing home and purchasing their next home. It is not unusual for the closing dates on the two transactions to differ.

So, if you are counting on the profit from the sale of your current home to buy your new one, it can put you in a challenging financial situation.

Thankfully, a bridge loan can ease the financial stress.  

Apply, Learn More or Contact Us Today!

If you're ready to get a bridge loan, apply now online. 

If you're just exploring options, we can help. This page is a great place to start learning about bridge loans. If you have questions or want to learn more, just contact us. 

Our team of mortgage lenders are also available to assist you by offering a FREE, NO OBLIGATION, in-person consultation. You can use the contact us link to schedule an appointment or give us a call at 515-232-5561 or 641-342-6581. 

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What is a bridge loan?

A bridge loan is temporary financing to provide a way – figuratively, a ‘bridge’ to purchase a new home without first selling your existing home.

The loan’s primary purpose is to cover the gap while you are waiting for the profit from your sale to become available. 

How does a bridge loan work?

A bridge loan will help provide funds for your new home purchase if you don’t have the necessary funds readily available.

The maximum amount you can borrow with a bridge loan is typically 90% of the value of your current home. For example, if your current home is worth $250,000, a bridge loan amount would be calculated this way: $250,000 x 90% = $225,000.

How to get a bridge loan

To qualify for a bridge loan, your First National Bank’s mortgage lender will look at:

  • Your debt-to-income ratio.
  • How much equity you have in your existing home. If you don’t have a substantial amount of equity in your current home, it may be hard to qualify.
  • Your credit score
  • Household income.

How is a bridge loan repaid?

A bridge loan is a form of short-term financing that gives individuals the flexibility to borrow money for up to a year. Bridge loans are secured by the property you plan to sell.

The loan is set up to pay monthly interest, and the principal will be paid off with the sale of the proceeds of the home. Borrowers must also pay the closing costs to set up the loan.   

Is a bridge loan right for you?

There are both pros and cons to obtaining a bridge loan. First National Bank’s mortgage lenders will discuss the advantages and disadvantages with you and offer their professional guidance on whether a bridge loan might be a good financial option.

Remember, a bridge loan is a short-term solution. Therefore, this type of financing is more expensive than a traditional, long-term financing option. Bridge loan interest rates depend on your creditworthiness and the size of the loan. In addition, borrowers must pay closing costs when they get a bridge loan.

Make sure to weigh your options, consider alternatives, and talk with one of our mortgage lenders for guidance.

When to use a bridge loan

  • For older adults. Bridge loans are popular with older adults who are moving from their existing home to a senior living community and they need additional time to sell their home.
  • Before you sell. A bridge loan is most frequently used by homeowners who want to buy a new house before selling their current property. A borrower uses their bridge loan as a down payment on a new home. 
  • To present an offer. You can use a bridge loan to present an offer without a financing contingency when you make an offer to purchase a home. A financing contingency can sometimes be a deal breaker if the seller has more than one offer on the home.  They are likely to choose the offer where the buyer does not have to sell the home prior to purchasing the new home.   

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