In the market for a real estate bridge loan? Real estate investors of all experience levels often find themselves faced with gaps in funding – in comes the utility of a commercial bridge loan. With flexible spending options under this style of loan, once awarded, you can apply the funds across your financial statements, making this particular type of loan the perfect way to bolster your project portfolio. When you’re looking for the perfect bridge loan of your needs, consider asking your lenders the following questions:
- How long will it take you to close? – Part of the appeal of a bridge loan is the speed at which the funds can be awarded to you. Your lender should be able to match the speed of the real estate market and confirming the possibility of that speed is essential to the process of awarding the loan. You should expect a reliable lender to process and award your loan in a matter of weeks, not months.
- Are you familiar with my market? – There are plenty of lending institutions which can offer you a bridge loan, but building your ideal loan package can only happen with a lender who is familiar with the work which you do. This is especially true of the real estate world and all of its facets. You want a lender that is familiar with our market and has experience lending on your property type.
- What is the average size of the loans with which you deal? – Lenders tend to specialize in specific loan sizes just like they tend to specialize in specific markets. Some lenders will tell you they can directly lend on this amount, when in reality they are looking for partners to help them close. You will want to vet out your lender, especially on the larger loan sizes.
- What is the application process? – Many traditional lenders require a high degree of documentation during the application process. On top of documentation, there may be application fees associated with the process as well. Going to a private, “Hard Money” bridge lender will offer the sake of ease when it comes to documentation. Typically tax returns and bank statements are not required by a hard money lender. They will want to understand the property and your plan to stabilize it. Know the requirements before you begin.
- Is a commercial bridge loan only on commercial real estate? – No. bridge loans can be on any real estate type; single family, multifamily or commercial. Bridge loans are for loans that do NOT involve renovation or construction.
- How much insurance do I need? – In order to provide collateral for your loan, some lenders will require you to have an insurance policy on the property worth no less than 100% of that property. Be sure to clarify those terms before taking out your loan.
What are the terms of the good faith deposit? – Different lenders have different processes for establishing their good faith deposits. Some lenders may not even require one. However, most establishments will require a good faith deposit for 1-2% of the cost of the loan amount and can be refunded at closing.
Finding the funding to fill the gaps in your real estate ventures is a common challenge faced in the industry and bridge loans are designed to help. Despite this strategy to fill gaps in your budget, finding the right lender can become a challenge without being properly prepared for the process – so go in informed! If you’re ready to start your bridge loan process, get started with our 30-second Prequalification Process today.