Bridge loans are being used more and more frequently by savvy real estate investors. The use of private capital for funding relatively short-term bridge loans has increased dramatically in the last few years.  Bridge loans can be used to buy an investment property when institutional lenders are dragging their feet on providing a loan and they can also be used as a type of “rescue capital” to pay off an existing loan that is coming due.  

The primary source of funding bridge loans are entities that use private capital – sometimes called hard money lenders- to fund short term real estate loans.  One of the most useful aspects of a bridge loan is how quickly it can be obtained.  Dealing with the right lender it may be possible to underwrite and close a bridge loan in as little as one week.  This compares to a month, or sometimes longer, to get a similar loan from a bank. 

What is a Bridge Loan?

In simple terms a bridge loan is a relatively short term (6 months to 3 years) real estate secured loan.  Opposite of a “permanent loan”, a bridge loan must involve a deed of trust on real property.  Bridge loans are typically paid with monthly interest only payments – no principal paid down each month.  One common use of a bridge loan is to purchase a new property before you sell and close an existing property.  In this case your lender might take two deeds of trust – one on the new property and the other on an existing property that has significant equity in it.

How Long Does It Take To Get A Bridge Loan?

How long it takes to get a bridge loan depends on your lender.  There are certain experienced and well capitalized private capital lenders that can close loans in very short time frames.  They have the capital, and unlike traditional banks, are not required to go through lots of red tape to satisfy the FDIC requirements. Montegra has closed bridge loans in less than one week when the borrower had the necessary documentation prepared.  

How To Speed Up the Bridge Loan Approval Process

 You will need to have your documents ready if you’re looking to obtain a bridge loan quickly. A current appraisal is almost always needed.  A detailed and accurate loan application giving all the facts about the loan request is always required.  A copy of the purchase contract is needed if it is an acquisition loan.  If it is an industrial property, a Phase I Environmental Report is typically required.  

Because bridge loans are often funded by private capital lenders, there is more emphasis on the loan to value ratio (LTV) than on the credit score.  Hard money lenders typically do not lend over a 65% ratio to the appraised value.  This is lower than banks, but hard money bridge lenders are more lenient about requiring financial liquidity or high credit scores than institutional lenders.   A complete and accurate personal financial statement is always required.  The more of these documents a prospective borrower can give their lender with the loan request, the shorter the time frame needed to close their loan.   

Using a local lender instead of a national lender will shorten the underwriting process because a local lender can immediately do a property inspection while a national lender typically needs more time to get an inspection done. Getting referrals from attorneys, CPAs and commercial Realtors for an experienced and reliable bridge lender is highly recommended.  The right lender could make a difference between a profitable investment and a problematic one.  One factor that lenders consider is their borrower’s “exit strategy”, specifically  how the borrower is going to pay off their bridge loan in the relatively short time frame.  Be prepared to discuss your exit strategy with your lender. 

Close Your Colorado Bridge Loan Fast 

 Bridge loans have many benefits including a flexible loan structure that is not normally available with banks and the ability to close quickly. These benefits are critical when it comes to obtaining real estate bargains once they hit the market.  However, bridge loans have a shorter time frame – usually not over 3 years – and have slightly higher interest rates and loan origination fees charged by private bridge loan lenders.

With 53 years of experience in funding bridge loans in the Colorado market, Montegra has the experience and reputation to help provide you with a bridge loan suitable to your requirements. The easiest way to apply for a bridge loan with us is to simply call and discuss your loan request with our experts or apply online.  We pride ourselves on cutting out as much red tape as possible to streamline your application and funding process.