Say you haven’t sold your current house but have already found your dream home — and need the cash to purchase it. Or maybe you’re a real estate investor and need a loan to purchase a foreclosure home you plan on flipping within the next year. Either scenario requires you to get financing — fast.
If you need cash now for a home loan and you don’t have enough time to go through a traditional lender’s approval process you have options. Take a look at these six privately funded or government-backed urgent loans that can be solutions to your problem of how to get a mortgage.
1. Consider Bridge Loans
What is a bridge loan? It’s a loan designed to bridge the gap between buying a property and securing permanent financing. A bridge loan is ideal for two situations: buying a home when you haven’t sold your current one yet, and purchasing an investment property like a foreclosure home.
- You can buy a new home before yours is sold.
- No prepayment fines come with bridge loans.
- Bridge loan rates are typically around 2 percent higher than fixed-rate mortgage loans’.
- A bridge loan’s closing costs might be higher than other loans’.
2. Check Out Hard Money Loans
Hard money loans are perfect for real estate investors who want to flip a house within a year. For this type of loan, lenders look at your ability to repay it, credit-to-debt ratio and current cash reserves, in addition to the area in which you plan to invest and how much experience you have with renovations.
- Private investors finance the loans.
- You might be able to get a hard money loan in as few as five business days.
- You can buy a home through an auction with this type of loan.
- Your loan-to-value ratio generally must be less than 75 percent.
- Origination fees and interest rates are higher on these loans than on market average loans.
- If your credit score is low you might have to make a large down payment.
3. Take Out an FHA Loan
An FHA loan is insured by the Federal Housing Authority, which mitigates a lender’s risk and enables him to offer you a better deal. Designed to help people become homeowners, these loans offer low down payments and closing costs, plus relaxed qualifying credit criteria. Only FHA-approved lenders can disburse these loans and you might be able to get one in as few as two or three weeks.
- Down payments can be as low as 3.5 percent.
- A FICO score of 500 and a minimum down payment of 10 percent might qualify you for the loan.
- You must meet credit score, income and monthly debt requirements.
- Private mortgage insurance is required with an FHA loan.
Find Out: How to Get an FHA Loan in 5 Easy Steps
4. See If You Qualify for VA Loans
If you’re a veteran, active-duty service member or surviving spouse, you might be eligible for a VA loan. Backed by the U.S. Department of Veterans Affairs, you can use VA loans to purchase, build or improve homes. To qualify for one, you must meet credit and income requirements and obtain a Certificate of Eligibility from the VA.
- No down payment or monthly mortgage insurance payments are required.
- You won’t pay any commissions or brokerage fees.
- You’ll likely have to pay a VA funding fee, which is a percentage of the loan amount.
- Interest rates and closing costs can vary among lenders.
5. Research First-Time Homebuyer Grants
First-time homebuyer grants are available through your state, county or local government. The U.S. Department of Housing and Urban Development provides the funding for these grants. HUD lists the eligibility criteria for these grants on its website.
- You don’t have to repay a homebuyer grant.
- Buying a home is much more affordable with this type of grant.
- HUD’s definition of a first-time home buyer isn’t stringent.
- You must qualify for a mortgage to receive a grant.
- The grant will not cover 100 percent of a home’s cost.
- HUD requires you to complete an approved homeownership course.
6. Look at Jumbo Loans
If you’re interested in buying a high-priced or luxury home, you might not be able to with a traditional home loan. A jumbo loan enables you to exceed the conforming loan limit set by the Federal Housing Finance Agency.
The FHFA conforming limit ranges from $424,100 to $636,150 depending on where you live in the U.S. If you have a FICO score of 700 or higher, this might be a good option for you.
- Purchase limits are higher with these loans.
- The loans offer competitive rates.
- In some areas, these loans are more affordable than traditional loans.
- Your debt-to-income ratio can’t exceed 45 percent.
- A jumbo loan will require a larger house down payment, typically 20 percent.
Whether you’re looking to buy your next home or purchase a house to fix up and sell at a profit, if you need money fast, one of these financing options will likely work for you. Talk to a lender in your area to find out if you qualify — and, perhaps most important — what your interest rate and loan terms will be.