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Types of Residential Mortgage Loans

Choosing a residential mortgage isn’t all that painful if you have the right team. The team at Titan will determine your budget and down payment once your credit and income is reviewed. They make it easy for you to understand what loan works best for your needs.
  • Conventional loans
  • Jumbo loans
  • Government-insured mortgages
  • Fixed-rate mortgages
  • Adjustable-rate mortgages

When you’re purchasing a property, you will typically need to work with a lender to secure financing, as the purchase is quite large. However, not all buyers come to the table with the same financial history or background, so flexible loan options are often important in the process. If you’re looking for a more flexible short-term loan, you may want to consider a residential bridge loan.

What Is a Residential Bridge Loan?

A bridge loan is a short-term loan that can be used to pay for a property until the borrower removes an obligation or secures more permanent financing. This asset-based loan is traditionally used to finance the acquisitions of a property, improvements, or renovations. It can also be a short-term solution for real estate investors to stabilize rent. This type of financing allows borrowers to bridge the gap during times when financing is needed but not yet available. Bridge loans are also referred to as gap financing, swing loans, and interim financing. A residential bridge loan provides quick access to cash, allowing the borrower to work on the property they plan to purchase or even purchase another property. Realtors and home flippers often rely on this source of funding to fix up a property they have purchased. They can then use the money they earn on selling the fixed-up property to pay back the bridge loan. Private money interest rates do not fluctuate like institutional loans that are tied to common interest indices. Therefore, obtaining a bridge loan can help a borrower to secure funding for a short-term need at a fixed interest rate.

When Are Bridge Loans a Great Fit?

You may choose to apply for a residential bridge loan if you need fast access to funding to pay for substantial renovations on your property or you have a property on the market but want to purchase another before it sells. A bridge loan can also be beneficial for contractors and real estate investors who are investing in the market and need funds quickly.

If you have ever taken on a residential renovation or property upgrade, you know that the cost can quickly increase as new things are uncovered. In this situation, you can obtain a residential bridge loan to “bridge the gap” to get the funding you need to complete the project and increase your property value. The general idea behind a bridge loan is that it can provide the cash required to fund a property renovation or purchase that will benefit the borrower’s financial situation.
Borrowers may also consider this type of loan if they meet the criteria below:

  • Up to 100% LTV on a transaction with cross collateral.
  • Property reposition and value add scenario.
  • Need to close fast to take advantage of an opportunity.
  • Credit score is below traditional bank guidelines.
  • Need to File updated tax returns to verify updated rents or revenues.
  • Commonsense underwriting.
  • Loan size is $100 thousand to $5.0 million.
  • Loan term of one to three years.

Benefits of a Bridge Loan

The key benefit of a residential bridge loan is the ability to secure access to funding for a purchase or project quickly. The terms of this loan type are flexible, which means that a borrower can get what they need without being tied down into challenging or stringent terms. You can use the money as a down payment toward another property, spend it on renovations and upgrades, or even use it to help stabilize the rent costs on a property you’re currently leasing to a tenant.

Comparing Bridge Loans to Traditional Loans

A bridge loan is a short-term loan with short-term repayment terms and interest rates, while a traditional loan is typically designed for long-term payback. One example of a traditional loan is a mortgage loan, which is usually spread out over 15 or 30 years and features a lower interest rate than other types of loans that would be paid back faster. The interest rate on a bridge loan is higher than a traditional loan, but that’s simply the nature of a short-term loan.

While the terms of bridge loans are quite flexible and can vary between borrowers, most loans of this type share several key characteristics. The first is a property as security, whether it’s one that is being sold or one that is being renovated. The second is a term that is generally between six and 12 months. The interest rate on a bridge loan can fall anywhere between the prime rate and prime plus 2%.

Who Qualifies for Bridge Loans?

Both residential property owners and commercial investors can potentially qualify for bridge loans. Depending on the terms of the loan and the lender you’re working with, you may be required to provide collateral. Property ownership can qualify as collateral, as can a property in which you hold substantial equity. You typically need a low debt-to-income ratio and a good credit score to qualify as well.

A business may utilize a bridge loan when waiting for long-term financing but is in need of funds to cover expenses. The organization may use the funds to purchase a building for business use or renovate an existing property in the interim period before the long-term financing deal comes through.

Working With Titan Funding

Both corporations and individuals can take advantage of bridge loans, and at Titan Funding, we can customize these loans for many different situations. Titan Funding is a team of passionate banking professionals who work together to assist both individuals and businesses with their capital needs. We leverage our years of experience in the industry to provide a single source for equity, debt, and investment capital. Our goal is to provide a better financial experience to each of our clients, including those looking into all their options to secure capital.

If you would like to learn more about residential bridge loans, contact us today. Our experienced and helpful financial professionals will be happy to answer any questions you might have and help you determine whether your situation qualifies you for this type of loan.

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