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Benefits • A homebuyer can purchase a new home and put the existing home on the market with no restrictions • Might gain a few months free of payments • Can still buy a new home even after removing the contingency to sell under certain circumstances HOME BUYING BENEFITS OF BRIDGE LOANS When using a bridge loan for a real estate transaction, the buyer can immediately use the equity in her existing house to buy her new home and put her existing home on the market without having to wait until the home sells. Bridge loans might not require monthly payments for a few months, and they offer homeowners the flexibility of paying when they have the cash flow. The buyer can remove the contingency to sell and still move forward with the purchase if they made a contingent offer to buy and the seller issues a notice to perform. Drawbacks • More expensive than a home equity loan • Must be able to qualify to own two homes • The stress of handling two mortgages at once plus the bridge loan interest HOME BUYING DRAWBACKS OF BRIDGE LOANS On a bridge loan, you might end up paying higher interest costs than on home equity loans. Typically, the rate will be 0.5 to 1.0 percent higher than for a 30-year, standard fixed-rate mortgage. Additionally, some people feel stressed when they have to make two mortgage payments plus accrue interest on a bridge loan because of the additional funds going out each month. If the home they're trying to sell isn't getting any offers, this could become even more stressful. HOW DO BRIDGE LOANS WORK? Not all lenders have set guidelines for minimum FICO scores or debt-to-income ratios for bridge loans. Funding is guided by more of a "does it make sense?" underwriting approach. The piece of the puzzle that requires guidelines is the long-term financing obtained on the new home.