What exactly is a bridge loan and what can it do for you? A bridge loan is simply a short-term loan used by a person or business that needs a fast cash infusion until permanent financing can be achieved. A bridge loan, sometimes referred to as a swing loan or gap financing, is generally expected to be paid back very quickly. Most bridge loans have a term of about six months to one year.

When would someone need a bridge loan? Bridge loans are often used by prospective home buyers who are ready to buy, but who have not yet sold their current home. When the housing market is booming and houses are selling within days or weeks of being listed, a bridge loan makes little sense. But what about those times when the housing market seems to be moving along at a more reasonable pace?

Imagine, for example, that you find your dream home. You are eager to purchase it, except for one major setback: you need to sell your current home first. In the meantime, you can snatch up that dream house by applying for a bridge loan. A bridge loan can allow you to pay off the mortgage on your current house, or gather enough cash to make a down payment on your dream house while you wait for your current home to sell. In hindsight, the opposite situation would be ideal: selling your home, and then finding your dream home. But since life, and especially issues of personal finance, are not always ideal, a bridge loan is a viable option for anyone who finds themselves caught in between.

The terms of a bridge loan can vary widely. Some types of bridge loans allow you to completely pay off the mortgage on your current home. A fairly typical bridge loan might work as follows: the bridge loan is used to pay off the mortgage on your current home, and the rest of the money is used to make a down payment on your new home. In this type of scenario, closing costs and six months of prepaid interest are normally subtracted from the loan amount. If the first home is not sold after a period of six months, the borrower is usually allowed to begin making interest-only payments on the bridge loan. When the first home is sold, the bridge loan can be paid off in its entirety, with any unearned interest payments credited to the borrower.

Be warned that using bridge loans in this way—to span the disparity between two separate transactions—can be costly. Bridge loans often come with high fees, so make sure you understand the terms of your loan before signing. Also, be prepared to face the possibility of having to pay the equivalent to three mortgage payments (your current house, new house, and the amount of the loan itself) until your home is sold. Before even considering a bridge loan, speak to your real estate agent. Find out how long homes in your houses’ price range are taking to sell. If the housing market is so slow that you expect your home to remain unsold for many months, a bridge loan may not be such a good idea.

Bridge loans are also commonly used in real estate investing. Individuals interested in investing in real estate property, but who may not have access to conventional loans, can use a bridge loan to make the purchase. Individuals who use bridge loans may be unable to qualify for conventional loans due to credit problems. Thus, many bridge loans are often available through non-traditional lenders, who offer interest rates ranging from 14 to 20 percent. These lenders often also charge ‘points’, or fees, on these loans. One point is one percent of the total loan amount. Because these lenders are not as concerned with credit ratings as traditional lenders, bridge loans are much more accessible, though also much costly.

Bridge loans offer a fast and relatively easy way to receive a fast cash infusion. But they are also saddled with higher than average fees and interest rates. The best advice regarding bridge loans is also perhaps the simplest: don’t use them unless you really have to.

Over the past decade, thanks to a real estate market that has been performing consistently well, home equity financing has become a viable option. This in turn has made the credit or loan option for home equity financing for consumers worth considering. Since everyday Americans realize the value of owning one’s own home to raise capital and refinance debt, home equity as a solid foundation is a powerful financial base to build on.

The year 2003 was a rollercoaster ride for the American stock market, but was consistently steady for the real estate market. Though the prices of homes continued to soar, it proved to be a happy trend as it proved that people still saw a home as a smart investment. This is good news for you, house owners—it signifies that despite the economic outlook, the value of your home continues to appreciate. This perhaps should give you the impetus to consider taking a financing option such as a home equity loan or line of credit.

Why consider home equity: Take for instance the rising worth of your own home and the boom in the real estate market—two solid reasons for you to seriously consider taking home equity financing. For one, home equity financing comes with a lot of tax advantages for you. You might also be able to reduce your taxes by claiming the interest you pay on your home equity credit as a deduction. Speak to your tax consultant about this. If you want to borrow money or secure your debt, you’ll find home equity products a smart choice since they carry a lower interest rate than other loans and may, therefore lower your monthly payments.

How to leverage your home equity financing: If you want to get the best out of your home equity financing, you could choose to do it as most people do: use it to refinance your debt and pay back higher-interest loans. But if you are fortunate enough not to have loan balances to repay, you can further raise the value of your house by improving it.  Perhaps you want to give a facelift to your kitchen or garage? Perhaps you need to add a second storey? These projects can easily be financed by home equity credit. Take a look at just how fellow-Americans get the most out of their home equity. And then, put it down to the boom in the real estate market.

Your kind of home equity plan: You can choose from either a home equity loan or a home equity credit line—something that largely depends on your needs. But to set yourself into estimating how much financing you require, you should consider a home equity loan. If you do, you will need to borrow only as much as you need for your home improvement project. But if you can’t estimate your needs, your best bet is a home equity line of credit might be a better choice. This is also helpful if you have more than one need such as reducing your credit card out standings and debt, besides also paying for a big purchase—both of which will demand ready access to huge sums of cash.

If your need is for stability or flexibility, yet again, home equity loans give you a steady payment plan. This means that your interest rate and monthly payments remain fixed over time. On the other hand, a home equity line of credit is as flexible an option as a credit card with your payments being judged against how much you borrow and the interest rates varying proportionately with a change in Prime Rates. And, if you need financing all together or once in a way, think again because a home equity loan can give you all the money you need all at once too! Besides, with this, you can borrow as much as you like when you want it, just so long as you remain within your prescribed credit limit.

Financing your home is a big decision for you. True, there are very many home equity loan products available today, but you need to think well about the home equity line of credit that suits your financial goals.

Have you decided to hit the road in your own recreational vehicle (otherwise known as a RV)?  The RV lifestyle is one that appeals to many whether just for a yearly vacation or to live in full time.  What about the costs of RVing?  With the high price of gas, the investment in a new recreational vehicle may seem daunting for some.  In the long run, securing a loan for a new RV will be well worth the trouble.

Your first step will be deciding which kind of RV suits your needs.   There are many different kinds of RVs, including motor homes, campers and trailers.  Which one you want will depend on how often you plan to use your RV and for what kind of activities.

As a new RV buyer there are probably many questions going through your mind.  How much will it cost to buy a RV?  How loan will it takes to process an application for a RV loan?  How big of a down payment will I need to purchase a RV?  Are there any tax deductions or benefits I will receive as a RV owner?  How short or long of a loan term will I be looking at?  Will my lender finance the kind of RV I’m looking at?

The answers to all of these questions are important, but you should be able to find them quite easily.  There is a wealth of information online that will help you with these decisions.  You also want to talk to the RV dealerships – they might even offer financing options for you to consider.  If you know people with a RV, be sure to get their input.  I’m sure they’ll be happy to share their experiences and expertise with you.

There are thousands of places to secure a RV loan nowadays, but you must take your time and do your research.  Picking the right lender for a RV loaner is, believe it or not, more important than choosing one for a car loan.  Why?  Your RV loan will probably be much larger in size than your standard car loan and you will probably be paying it off over a longer period of time.  You need to find the lowest interest rate and best terms you can so that you do not end up paying too much interest over a long period of time.

As with any loan, it is important to have your finances in order before applying for a loan.  Your credit report will have an impact on the interest rate and terms you are able to secure.  Be sure you have seen your credit history and corrected any errors in it before applying for a loan – it may make the difference between your application being approved or rejected.

There are all sorts of lenders out there who offer RV loans.  It is relatively easy to secure a RV loan because most lenders see RV owners are reliable.  This perception makes it easier and cheaper to buy a RV.  You can contact your local bank or lending institutions or you can check out competitive offers online.  There are online RV loan calculators that will help you figure out the best type of loan for you and breakdown the long-term costs for any quote you receive from a lending institution.

If you know you are going to purchase a new RV and know the price range or specific model you are looking at, it might be a good idea to get approval for your loan before you even go browsing.  You’ll have greater bargaining power at the dealership – almost like paying with cash!

You don’t have to know what model you are looking for before applying for a loan though.  You can receive pre-qualification approval before you begin shopping for your recreational vehicle.

You should have at least a 10% down payment.  Lenders will usually cover up to 90% of the cost of a recreational vehicle, with most down payments falling between 10% and 20%.  Once your loan has been approved, the money can either be transferred to you to directly to the seller.  Be sure you look into insurance though – RV insurance must be available by the time that the loan is closed.  Contact your current insurance company to ensure coverage for your new vehicle.

Often, when your lender scrutinizes your loan application for a new home or piece of property so finely that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The cause for rejection given below will help you understand just why it happens to some people.

Causes for rejection:

The appraised value is far too low: Your lender perhaps found the ratio of the loan amount to the sale price or the appraised value of the property to be substantially lower than the purchase price or loan-to-value (LTV) ratio. Or perhaps the LTV is higher than your lender is allowed to approve. Then, perhaps you have applied for 90-95% of the purchase price as the loan amount. A low appraisal will then make your loan request far too large. 

If the seller’s price of the property far outstrips the prevailing rates in your locality, you would be best advised to renegotiate the price with him so that it conforms to the prices in the area. It should also be one which your lender would not refuse in order to pass your loan request. If this can’t be done, it might be a better idea to accept a smaller loan amount, and pay the balance from your personal funds.

Insufficient funds: When your lender goes through your financial information and you’re verification of deposit, he will find that you do not have enough funds to make the necessary down payment and cover closing costs. Even if these funds do not come from a loan, a gift could go a long way. Alternatively, you could ask the seller to take back a second mortgage on the property. This would help lower your down payment or get the seller to pay some of the closing costs, perhaps the origination fees. After all this, you could ameliorate the situation by just waiting in the wings, while you begin a savings scheme. 

Do you have insufficient income? Lenders will refuse your loan application if they find that the mortgage payment on your property exceeds 28 percent of your monthly gross income. In addition, if your total debt including mortgage payments and other installments exceed 36 per cent, you stand to be refused. The figures are higher for FHA loans. But the situation can improve for you if your credit card record is good and you can prove that you already are carrying a huge household expense including rent or mortgage payments, perhaps your lender will swing his decision in your favor. This is just why you need to make a clean breast of your income and expenses while making an application. 

Up to your eyes in debt: Often, lenders don’t reject applications solely because of the amount of debt they carry on their heads. It is also the many credit cards they possess and revolving credit accounts with proof of rising account balances that come close to the limit prescribed. Such information is detrimental if you are out to prove your creditworthiness. To remedy the situation, you will need to pay off as many of your debts as possible and then reapply for a loan. 

Poor credit history: What can be more devastating than to have your loan request turned down due to a history of poor debt repayment habits? If your lender sees that you have a history of making late charges often, owing amounts to the bank or insolvency, he’s hardly likely to pass a loan application for purchase of property. Your lender is surely not going to be tolerant of a bad credit record. Even if you have had a low loan-to-value ratios and debt ratios, you cannot wipe out a history of poor credit. 

Rejection is not the end of the world: Just because a lender rejects your loan application doesn’t mean you can never own property in all your life. You can take corrective steps to improve your chances of acceptance. But if you work steadfastly at it, you can work a way round your problems. Find out why your loan application was rejected and work towards loan acceptance.

It pays to be prepared if you’re in a competitive market. If you are fortunate enough to be pre-approved for a loan, it can give you an edge over your competitors who may be interested in the same home or flat who perhaps aren’t financially sound. If you do therefore take the large step of being pre-approved, it’s an indication to the home seller that you are, indeed, serious about buying his home.

So, how do you go about being pre-approved for a loan? Begin by doing an honest self-evaluation of your financial situation. Draw up a list of all your assets comprising your cash, bonds, savings, stocks, mutual funds, IRAs, etc. Against that, make another list of all your debts—e.g. your car installments, credit card payments, loans, etc. A difference of the two will tell you how much you have available toward buying a house. But bear in mind that you will have other additional expenses associated with buying a house. This will give you a realistic picture of just how much you can comfortably borrow and how much you will qualify to borrow. Accordingly, you can meet up with home sellers and express your interest in buying their houses.

With this information at your command, you will be in a better position to begin the process of being pre-approved with a lender. Actually, to be pre-qualified for a loan is a simple process that does not necessitate you’re using a particular lender alone. Once this is done, you’re one step closer to meeting up with your home seller.

This is the right time for you to learn the difference between being pre-qualified for a loan and being pre-approved. To be pre-qualified means you call up a lender and give him your details on the phone and create an “in file” credit report based on details given by him. His information is therefore largely unverified and based on this he will give you a pre-qualification verbally or give you a letter to that effect, subject to a variety of conditions. But a pre-approval refers to a formal commitment from a lender once you have filled out an application for a residential mortgage loan and your details have been verified. These details will include a “tri-merge” credit report from the three largest credit reporting agencies—Equifax, Experian and Trans Union Corp. This is a very initial stage, much earlier in the stage of operations than when the home seller emerges.

To be pre-approved gives you an edge when shopping for a home. You learn to identify the price range in which you’re looking to buy a home. This makes it easier for a home seller to accept or reject your offer if you’re bidding over a non pre-approved buyer. You must also familiarize yourself with a comfortable monthly loan installment.

As in any new venture, preparation is a very important step—after all, this is a business scenario involving big money, loans, etc. It is necessary you get pre-approved for a loan before you start pinpointing the house you want. Besides, pre-approval will put you in a better negotiation position with the home seller by allowing you to move in quickly when you find the best house at the right price.

In order to get the best deal at a price that doesn’t hurt you too much, you need to shop around for the best mortgage rate, APR, the best loan and terms that suit your financial situation best before you see a home seller. To get pre-approved, be sure you get a mortgage loan commitment from your loan officer rather than a mere pre-qualification letter. And don’t allow your real estate agent act on your behalf as a mortgage loan officer too as it will put you on shaky ground.

To avoid such a situation, you should get a referral from a friend, neighbor or co-worker. Also, speak to two lenders or loan officers before deciding. Next, take a hard look at the APR rate. Ask the loan officer for referrals. At this stage, being pre-approved is a somewhat distant dream for you—the formalities being so many. And meeting the home seller? Just a little farther off.