Bridge Loans in Atlanta: How to Unlock Home Equity to Buy Before You Sell

What’s required to get a bridge loan in Atlanta?

To qualify for a bridge loan in Atlanta, you typically need the following:

• Qualifying income: Your lender will assess your income to ensure you can handle payments on your existing mortgage, the new mortgage, and possibly an interest-only payment on the bridge loan.
• Sufficient equity: At least 20% equity in your current home is needed, though some lenders may ask for up to 50%.
• Good credit history: A good credit score, usually above 650, is required. This score influences your interest rate and other factors, like the loan-to-value ratio. Checking with your current mortgage lender is beneficial, especially if you have a solid payment history.
• Your home listed for sale: Some lenders may need proof that your current home is on the market, ensuring it will sell before the bridge loan term ends.

How much does a bridge loan cost in Atlanta?

A bridge loan in Atlanta typically has a higher interest rate than a standard mortgage. You can expect interest rates to be about 1-3 percentage points higher than a traditional mortgage loan. In addition to the increased interest, bridge loans often incur extra transaction fees.

The higher cost is due to the increased risk for lenders, as there’s a chance your current home might not sell within the expected timeframe. This risk means you should be financially prepared to manage your mortgage and bridge loan payments simultaneously, should this situation arise.

The specific rate you’ll get depends largely on your creditworthiness and the lender you choose.

How to reduce bridge loan costs

If your bridge loan and new mortgage are through the same lender, you might not incur additional underwriting or mortgage fees. These loans will likely be underwritten and approved simultaneously. It’s beneficial to compare different options, as bridge loans are meant to be a temporary solution. Consider the cost, convenience, and suitability for your situation.

Budget for closing costs

Be prepared to cover closing costs and various legal and administrative fees. These costs typically range from 1.5% to 3% of the loan amount and may include:

• Appraisal fee
• Administration fee
• Escrow fee
• Title policy costs
• Notary fee
• Loan origination fee

These expenses are an important consideration when budgeting for your bridge loan in Atlanta.

Bridge loan cost example

Below is an example of how much a $200,000 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 Atlanta house to sell. The new home’s asking price is $400,000. You can only come up with $200,000, but you have at least another $200,000 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.

*These closing costs typically range between 1.5%-3% 

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Who provides bridge loans in Atlanta?

Not all financial institutions in Atlanta offer bridge loan products due to their specific underwriting requirements. If you’re considering a bridge loan, exploring your options with various lenders is a good idea. The most common sources for bridge loans in Atlanta include:

• Your mortgage lender
• Local banks
• Credit unions
• Hard-money lenders
• Non-qualified mortgage (non-QM) lenders

Additionally, there are real estate companies that specialize in facilitating bridge loans, helping to bridge the gap between buying and selling a home. We’ll delve into how these companies operate later in this post.

Are there alternatives to bridge loans in Atlanta?

While a bridge loan might not work for every Atlanta 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 Atlanta. 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 Atlanta 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 Atlanta:

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.

For Atlanta 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 Atlanta, 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 Atlanta homeowners

As Atlanta homeowners face the challenges of a tight housing market and rising home prices, many are discovering that bridge loans offer a streamlined approach to managing the intricacies of buying a new home while selling the old one.

Bridge loans enable you to borrow against the equity in your previous home, affording you the flexibility and time to sell without the pressure of synchronizing every detail perfectly. This financing option can significantly reduce the stress of the transition, giving you breathing room to focus on finding your ideal new home.

However, it’s important to remember that bridge loans, while convenient, may not be the ideal solution for everyone due to their cost and specific requirements.

For an alternative, consider exploring HomeLight’s Buy Before You Sell program. This innovative approach aims to ease the uncertainty of your next home purchase.

Additionally, HomeLight can connect you with a top Atlanta real estate agent who has expertise in bridge loans and other financial solutions, ensuring you make the best decision for your unique situation.

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