Bridge loan

A bridge loan is designed specifically for homeowners who are in the process of buying a home and selling a home at the same time.

A Home Equity Loan is a long-term option meant for homeowners who are planning to stay in their current home. It’s most often used for things like debt consolidation or home improvements.

Pros

• It unlocks the equity in your home for your next down payment or closing costs, without having to wait for your current home to sell
• You don’t need to have a home sale contingency, so you can make more competitive offers
• It reduces the pressure to accept a lower offer or rush the sale of your current home
• You can avoid the need for temporary housing or double moving expenses

Cons

• Higher credit score, lower debt-to-income ratio, and substantial equity are required to qualify
• Bridge loans usually have higher interest rates and fees compared to traditional loans
• There’s a risk if your current home doesn't sell within the 6-month term

You’re eligible if you meet these requirements:

• You have a credit score of 740 or above and a maximum debt-to-income ratio of 45%
• You have enough available home equity, with a maximum LTV/CLTV/HCLTV of 80%
• The home you’re selling is your primary residence and a single-unit property
• You’re buying your new home through Rocket Mortgage and you’ll be using it as your primary residence

Typically your current home needs to be listed for sale – otherwise you’ll need to have a listing agent agreement or a guaranteed buyout agreement in place.

You can use it to cover your down payment or closing costs on your new home or to pay off your current mortgage.

It can’t be used for debt consolidation or to pay off non-mortgage debts.

You’ll make interest-only payments each month for up to 6 months.

When your home sells, the full loan amount (also known as the principal) is due in a single payment.

If you sell your home and pay off the bridge loan early, you only pay interest accrued up to that point.

On the bridge loan, only the interest-only payment is factored into your DTI. On the purchase, your bridge loan balance can usually be excluded from debt calculations. If you have questions about your unique DTI scenario, talk to us.

Even if your home hasn’t sold, you’re still required to pay back the principal balance in full.

We’ll work with you to understand your situation and review available options, but it’s very important to plan for your current home’s timely sale when using a bridge loan.