Bridge Loans in Oklahoma: The Path to ‘Buy Before You Sell’ Using Home Equity
- Published on
- 14 min read
-
Richard Haddad Managing EditorClose
Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
Navigating the intricate dance of selling your old home while securing your new dream house in Oklahoma can be a daunting task. The balance of timing and funds becomes even more precarious when faced with a competitive housing market where inventory is scarce and prices seem to keep climbing. For many, it feels like the only path is to sell, move into a temporary place, and then hunt for a new home — a process that is both costly and stressful.
But what if you could seamlessly transition from your current home to the next? Enter the bridge loan, a financial tool designed to bridge this very gap. As a short-term financing solution, bridge loans empower you to leap ahead to purchase your new Oklahoma home before saying goodbye to your old one, helping you keep all the pieces in place without the interim shuffle.
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.
DISCLAIMER: 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 Oklahoma, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
Imagine you’ve found the perfect new home in Oklahoma, but your current one hasn’t sold yet. A bridge loan swoops in as your financial lifeline. In simple terms, it’s a short-term loan that uses the equity in your existing home to help finance the new purchase.
Think of it as a stopgap that gives you the cash needed for a down payment and other immediate expenses linked to your new home acquisition. This financial bridge carries you over the gap between buying your new property and selling your old one.
Generally, bridge loans have a lifespan ranging from six months to a year, and while they may come with higher interest rates due to their temporary nature, they offer you the agility to move on your terms.
How does a bridge loan work in Oklahoma?
Imagine you’ve stumbled upon an Oklahoma house that checks all your home shopping boxes. But there’s a hitch: your current home is still waiting for the right buyer. A bridge loan offers you a way to move forward. By tapping into the equity of your unsold home, you can secure the funds needed for the down payment and closing costs of your new abode.
In many cases, the financial institution where you’re seeking a mortgage for your new Oklahoma home will manage your bridge loan as well. They’ll typically expect your home to be actively seeking its new owner in the market and offer the bridge loan with a 6- to 12-month term.
Your lender will take a close look at your debt-to-income ratio (DTI) — an equation that takes into account the payments from your current mortgage loan, your new payment on the property you’re purchasing, and the interest-only payment on the bridge loan you are requesting.
But if your old house is on the brink of a sale, with a buyer who has secured loan approval, the lender might decide to consider only your new mortgage payment in their calculations. Lenders want to be confident that you can make the payments on both properties in the event that your home does not sell right away.
What are the benefits of a bridge loan in Oklahoma?
Securing a bridge loan in Oklahoma can unlock several advantages that streamline the transition between selling your old home and settling into your new one:
- Flexibility to make a non-contingent offer: Position yourself as a more attractive buyer by making offers that aren’t contingent on your home’s sale.
- Single-move convenience: Skip the hassle of multiple moves — go straight from your old home to your new one.
- Time to prep your home for sale: Stage and improve your old property without the stress of living there.
- Potential for deferred payments: Some lenders may offer a period where you’re not required to make payments on the bridge loan.
- Act swiftly on ideal properties: Jump on the opportunity to purchase your dream home without waiting for your current home to sell.
These benefits make a bridge loan a strategic choice for Oklahoma homeowners looking to balance the buy-sell process, using the sale proceeds to settle the bridge loan afterward.
What are the drawbacks of a bridge loan?
Bridge loans can be a powerful tool in your real estate arsenal, but it’s important to weigh their potential downsides before proceeding:
- Higher overall loan costs: Expect slightly higher interest rates than a traditional mortgage and additional fees like underwriting and origination charges.
- Increased financial burden: Juggling payments for two mortgages plus a bridge loan can strain your finances.
- Stricter qualification criteria: Approval for a bridge loan often requires better credit and financial standing than a traditional mortgage.
- Slower underwriting process: The underwriting process for a bridge loan can be slower than what your timeline might normally allow.
Furthermore, your home equity plays a crucial role; if you owe more than 80% of your home’s value, you may find it challenging to qualify for a bridge loan.
When is a bridge loan a good solution?
A bridge loan can be the perfect financial instrument for certain real estate scenarios in Oklahoma, especially when you find yourself in these situations:
- You require your current home’s equity to fund the down payment for your new home.
- Double moves and temporary housing are impractical or too costly for your situation.
- The home you’ve set your heart on is available now, and you need to act fast to avoid a bidding war.
- Previous offers you’ve made have fallen through due to home sale contingencies, and you need a stronger bargaining position.
- You’re convinced that selling your home when it’s empty or after professional staging will yield a better sale price or expedite the sale, but you can’t do this while living there. A bridge loan provides the means to move out and prep your home to shine on the market, maximizing appeal and potential offers.
What’s required to get a bridge loan in Oklahoma?
To secure a bridge loan in Oklahoma, you should be prepared to meet these criteria:
- Qualifying income: Lenders will need to confirm you can manage payments on your current and new mortgage, along with the bridge loan.
- Sufficient equity: At least 20% equity in your current home is typically necessary, with some lenders preferring as much as 50%.
- Good credit history: Aim for a credit score above 650 to satisfy most lenders, though the higher your score, the better the terms you may receive.
- Home sale in progress: Some Oklahoma lenders might require proof that your current home is on the market to make sure it will be sold by the end of the bridge loan term.
How much does a bridge loan cost in Oklahoma?
The cost of a bridge loan in Oklahoma can vary, but generally, it’s priced higher than a conventional mortgage. Interest rates for bridge loans are usually 1-3 percentage points above the prevailing mortgage rates. This markup reflects the lender’s increased risk, as they’re providing you with the flexibility to purchase a new home before selling your current one.
Remember, if your existing home doesn’t sell within the bridge loan’s term, you’ll be responsible for covering both your mortgage and the bridge loan payments. Ensure your financial stability can withstand this potential burden.
How to reduce bridge loan costs
Securing a bridge loan through the same lender financing your new home may lead to savings. In such cases, redundant charges like underwriting fees might be waived, as both loans undergo a simultaneous underwriting process.
Comparing offers from multiple lenders can also help minimize costs. Keep in mind that bridge loans are temporary, so consider the broader financial picture and the overall convenience each option provides.
Budget for closing costs
Additional costs associated with a bridge loan are unavoidable. Closing costs, typically between 1.5% to 3% of the loan amount, will include various fees:
- Appraisal fee
- Administration fee
- Escrow fee
- Title policy costs
- Notary fee
- Loan origination fee
These costs can add up, so factor them into your overall budget when considering a bridge loan in Oklahoma.
Bridge loan cost example
Below is an example of how much a $100,000 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 Oklahoma house to sell. The new home’s asking price is $200,000. You can only come up with $100,000, but you have at least another $100,000 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 | $100,000 | $100,000 |
| Interest (varies) | 10% (example for 6 months) | $5,000 |
| Origination fee | 1.5% | $1,500 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $500 | $500 |
| Closing cost* | 2% | $2,000 |
| Total repayable amount | $110,000 |
*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 Oklahoma?
In Oklahoma, the pool of lenders offering bridge loans might be smaller due to the specific underwriting requirements associated with these loans. If you’re considering a bridge loan, exploring multiple lending options is a prudent step. Here are some common sources where you might find bridge loans:
- Your mortgage lender: Often the first stop for many borrowers, as they may offer customer loyalty benefits or streamlined services for existing customers.
- Local banks: They might provide more personalized service and have a better understanding of the local real estate market conditions.
- Credit unions: Membership-based and often offer competitive rates to their members.
- Hard-money lenders: Typically more flexible with their lending criteria but may charge higher interest rates.
- Non-QM lenders: These lenders provide loans that don’t meet the strict criteria of conventional mortgages, which can be useful if you don’t fit traditional lending molds.
Some innovative real estate companies also offer integrated services, including bridge loans, simplifying the process of navigating between buying and selling homes. We’ll explore how such companies can assist you in a later section of this guide.
Are there alternatives to bridge loans in Oklahoma?
While a bridge loan might not work for every Oklahoma homeowner’s unique situation, there are alternatives to consider:
- Home equity loan: This kind of loan (sometimes called a HEL) allows you to borrow money using the equity in your home as collateral. Interest rates for a home equity loan can be more expensive than your current rate on your first mortgage, but instead of completing a cash-out refinance (paying off the first mortgage and borrowing cash), you can just borrow the money you need at the higher interest rate and leave your first mortgage of at its lower rate.
- Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This allows you to pull money out of your property for a relatively low interest rate. Instead of receiving the money all at once, your lender will extend a line of credit for you to borrow against. You might, however, have to pay an early closure fee if you open this line of credit and close it very soon after. Unlike a home equity loan, HELOCs typically have adjustable interest rates.
- Cash-out refinance: This type of loan lets you pull cash out of your home while refinancing your previous mortgage at the same time. Interest rates are typically higher for these kinds of loans compared to regular refinances, but are lower than those for bridge loans. This is not a solution for everyone, though. For example, you cannot do two owner-occupied loans within one year of one another. This would mean that you might have to wait longer to finance your new purchase with an owner-occupied mortgage using the cash from your cash-out refinance.
- 80-10-10 (piggyback) loan: This option is called a piggyback loan because you would be taking a first mortgage and second mortgage out at the same time to fund your new purchase — this means that you would only need 10% down. For buyers who can’t make as large of a down payment before selling their previous home, this could be a solution that helps them avoid the cost of mortgage insurance. You would, however, still be carrying the cost of three mortgage payments until you sell your current home and can pay off the second mortgage.
- A 401k loan: Borrowing against your retirement account comes with some benefits and drawbacks — your repayment period will be relatively short (up to 5 years), and your monthly payment will likely be high. This could affect your ability to qualify for your new mortgage, as your lender will need to include this monthly payment when calculating your debt-to-income ratio. If your 401k plan allows, you might be able to borrow up to $50,000 to put toward your new purchase.
Are there modern ways to buy a house before I sell?
With today’s technology, there are real estate solution companies like HomeLight that incorporate bridge loans into convenient programs that streamline the process of buying and selling a house at the same time in Oklahoma. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you successfully complete your move to a new home, thereby reducing stress and worry.
Together with your Oklahoma agent, HomeLight can help you move into your new home with speed and certainty, while helping you get the strongest possible offer for your old home. Check with your agent to see if HomeLight Buy Before You Sell is available in your area.
Examples of other “Buy Before You Sell” or home trade-in service companies include Knock, Orchard, Flyhomes, and Homeward.
How does HomeLight Buy Before You Sell work?
Here is how HomeLight’s Buy Before You Sell program works for home sellers in Oklahoma:
1. Apply in minutes with no commitment: Find out if your property is a good fit for the program and get your equity unlock amount approved in 24 hours or less. No cost or commitment is required.
2. Buy your dream home with confidence: Once you’re approved, you’ll have access to a portion of your equity in your current home. You’ll be able to submit a competitive offer with no home sale contingency at any time — regardless of how long it takes to find your dream home. Our near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your current home.
3. 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. You’ll receive the remainder of your equity after the home sells.
Benefits of Homelight Buy Before You Sell
- Flexibility in timelines: No need to sync up sale and purchase dates perfectly. This program gives you breathing space to plan your move without feeling hurried.
- Financial peace of mind: Say goodbye to the stress of potential double mortgages or dipping into savings to bridge the gap between homes.
- Enhanced buying power: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
- Sell for up to 10% more: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price, according to HomeLight transaction data.
For Oklahoma homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. Learn more program details at this link.
HomeLight also offers other services for homebuyers and sellers in Oklahoma, 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 10 days.
You might also try HomeLight’s Net Proceeds Calculator as you plan your home sale.
A creative financing solution for Oklahoma homeowners
As Oklahoma homeowners face the challenges of a competitive housing market, bridge loans emerge as a creative financing solution, offering a smoother transition from selling to buying a home.
By leveraging the equity in your current home, you gain the flexibility to secure your next property without the rush of selling first. This can alleviate the pressure and allow you to wait for the right offer on your home.
However, this convenience comes with a cost and may not align with everyone’s financial situation. It’s essential to weigh the benefits against the potential risks and expenses.
For a more streamlined approach, consider exploring options like HomeLight’s Buy Before You Sell program, which offers a modern take on bridge financing. This program, along with guidance from an experienced Oklahoma buyer’s agent who understands the intricacies of bridge loans, can help you navigate your next home purchase with greater confidence and ease.
Header Image Source: (disorderly / DepositPhotos)
