Private Hard Money Lender in California, Texas and Arizona: Bridge Loan for Owner Occupied Home - How does it work?

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Tuesday, September 29, 2015

Bridge Loan for Owner Occupied Home - How does it work?

HOW DOES A BRIDGE LOAN WORK

Bridge Loans are Asset-based loans (ABLs). These loans are revolving lines of credit or term loans that are secured by the borrower’s assets such as a real estate.

How much credit a borrower can access is primarily determined by the quality and value of the collateral, which can range from accounts receivables and inventory to equipment and real estate.

For a real estate a bridge loan transactions is to finance the initial construction of a dwelling with a terms of twelve months or less, such as a loan to purchase a new home where the consumer plans to sell a current dwelling within twelve months.

Reasons to take a Bridge Loan:
  •   Move before you sell your current home
  •   A better alternative than obtaining an equity partner
  •   Bridge the gap, while waiting on conventional financing
  •   Down payment to begin a build-out project
  •   Acts as a line of credit with access to 5 loan drafts over 120 days
  •   Equipment purchasing
  •   Cash flow stabilization
  •   Working capital
  •   Acquisition
  •   Turnaround financing
  •   Capital expenditures
  •   Debtor-in-possession (DIP) financing
  •   Growth
  •   Recapitalization
  •   Refinancing/restructuring
  •   Buyout
  •   Leveraged employee stock ownership plan (ESOP)
Benefits of Bridge Loan:

  •    Fast and convenient
  •   Saves money
  •   Flexible
  •   Keeps you in control of your business
CFPB Renewal Temporary or “Bridge Loan” 
12 CFR Part 1026 (Regulation Z)
§1026.43 Minimum standards for transactions secured by a dwelling.

Under § 1026.43(a)(3)(ii), a temporary or “bridge” loan with a term of 12 months or less
is exempt from § 1026.43(c) through (f)    (known as the seven gate of hell)

What are the sections of CFPB?

§1026.43(a) Scope
§1026.43(b) Definitions and under this section you find this information:
§1026.43(a)(3)(ii)  exempt for bridge loan the following sections

§1026.43(c) Repayment ability
§1026.43(d) Refinancing of non-standard mortgages
§1026.43(e) Qualified mortgages
§1026.43(f) Balloon-payment qualified mortgages made by certain creditors

The following sections still apply to bridge loans:
§1026.43(g) Prepayment penalties
§1026.43(g) Evasion; open-end credit.

What is the definition of a “Bridge Loan”?
It is a temporary or “bridge” loan with a term of 12 months or less, they are:


  such as a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months or a loan to finance the initial construction of a dwelling;

  a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months and a loan to finance the initial construction of a dwelling.

  1026.35(c)(2)(v) A loan with a maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.

  1026.32(d)(1)(ii)(B) A loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition or construction of a dwelling intended to become the consumer's principal dwelling; or

  1026.35(b)(2)(i)(C)A temporary or bridge loan with a loan term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months; or

  1026.43(a)(3)(ii)A temporary or “bridge” loan with a term of 12 months or less, such as a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months or a loan to finance the initial construction of a dwelling;

Things to consider when doing a bridge loan.

A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt.

FACTORS. In determining whether credit to finance an acquisition—such as securities, antiques, or art—is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

GENERAL.
1.The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.

2.The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.

3.The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.

4.The size of the transaction. The larger the transaction, the more likely it is to be business purpose.

5.The borrower's statement of purpose for the loan.


Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
www.Level4Funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027
   
 Equal Housing Opportunity. *APR varies from 9.6 – 12.5% **Contingent on valuation and site inspection. We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. This is not a Good Faith Estimate (GFE) and should not be considered as such. Costs, rates and terms can only be determined after completion of a full application. Mortgage rates could change daily. Actual payments will vary based on your individual situation and current rates. Products are available in Arizona only. To get more accurate and personalized results, please call (623) 582-4444 to talk to one of our licensed mortgage experts. Terms and conditions of this and all loan programs are subject to change without notice. Level 4 Funding LLC is licensed in the State of Arizona, NMLS 1018071 AZMB 0923961.

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