In a market as hot as Charlotte’s, putting in a contingent offer to buy a new home is getting much harder to do.
Inventory levels keep dropping and the number of potential buyers just keeps rising.
So does this mean you should sit it out and wait until the market cools off?
No! You’ve got several options available to help you secure the funds you need to make a non-contingent offer:
Your first option is the tried-and-true bridge loan. With this type of financing, you’re able to leverage the equity you’ve built into your current home to create a financing solution to purchase your next home.
A bridge loan can accomplish what you need, but typically it won’t check all of the boxes. For instance, you’re likely not going to get the amount of equity you’d like out of your current home. Max proceeds are typically 70% – 80% LTV) – and it can be a clunky process. And by a clunky process, we mean more conditions and hoops to jump through. This will result in a longer contract to close.
Securing a bridge loan will typically cost you somewhere between $1,000 and $2,000 while taking upwards of 60 days or more to close depending on the bank you’re working with.
And like many products that have been around for a while, newer and better options arise over time that offers the same solution with an easier path. So while bridge loans may be your most established option, they’re no longer as popular as other options available today.
So what are the newer options? Keep reading to find out!
A home equity line of credit (HELOC) is one of the most common and most popular options available.
With a HELOC, the funds you’ll use to make your non-contingent offer will come from the equity you’ve built into your current home. It’s your money so you can do what you want with it!
Some lenders will allow you to pull up to 100% of your available equity, but most of the time borrowers will stick to 90% to be conservative.
Factors considered for a HELOC include the value of your current home and the amount owed on your current mortgage. These typically take about 30 days to secure, but can sometimes move quicker when tied to a purchase.
A third common option available today is third-party financing with companies such as Ribbon. These products are newer to the market and more flashy, but they’re popular because they get the job done.
Financing through a third-party lender is a great option if you don’t qualify for 3 mortgages (i.e. your current mortgage, the new mortgage, and a HELOC).
For a 1% or 2% fee, the lender will put a backup cash offer on the home you’re bidding on so you can have a guaranteed close. If they don’t have to buy the home, the cost is only 1%. If they do have to buy the home, they’ll charge 2%.
You’ll then rent the home from Ribbon until you’re ready and able to buy.
There are more third-party options available similar to Ribbon so your options may be even more than you think!
If you want to discuss any of these options further, reach out to our team to chat!