Banker advises alternative to bridge loan to buy Milford home

Mortgage banker: Dave Stambone

Property type: Single-family purchase in Milford

Home value: $459,000 Loan amount: $367,200

Loan terms: Conventional, 30-year fixed rate at 4.625 percent, no points

Backstory: A former client returned to Stambone to discuss financing options on a potential home purchase.

He owned a condo and had been casually looking at larger, single-family homes online for the past six months.

He found the perfect home for his family but he was convinced that he had to sell his condo first. He was fearful of losing the property but committed to making the purchase possible.

The lack of inventory on the market has been a challenge for most buyers. Typically, when a new, attractive unit hits the market at a fair price, there can be multiple offers. The limited supply of inventory, combined with a surplus of buyers has created a very competitive real estate market for most buyers.

Confused, the client called Stambone and requested if any bridge loan options were available.

The buyer had fair credit, strong employment history, a well-funded retirement account, but only a fair amount of cash saved in the bank.

Although the buyer’s condo was not listed for sale, he had plenty of equity and would walk away with a large sum of money once it sold. Per his Realtor, similar condos in the area have been closing within 60 days of listing due to the high demand.

Stambone explained while there was no formal bridge loan option, he may want to consider another idea; consulting his financial adviser about borrowing temporarily from his retirement account. The buyer had sufficient income to support both mortgages if required, but did not have enough cash available for his desired down payment.

The plan was executed perfectly and the timing could not have worked out any better. First, Stambone pre-approved the buyer, making the purchase not contingent upon the sale of his condo.

Second, the buyer reached an agreement with the seller on a price and won the bidding war.

Third, he began the process of borrowing from his retirement account to act as a bridge loan. He listed his condo immediately for sale and a month later closed on the purchase.

Finally, after moving into his dream home, he sold his condo and paid back his retirement loan with no penalty.