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Bridge loans give homebuyers a practical way to handle the gap between selling their current home and buying a new one. Homes in Denver County typically stay on the market for 36 days and 47 days in Jackson County, which creates challenges for many Colorado residents.
Homebuyers frequently tell us they need to move fast in competitive markets and can't wait for their existing home's sale. Bridge loans become particularly useful here. These short-term financing options typically last from a few weeks to several months and help buyers make strong offers without home sale contingencies.
This piece covers everything about using bridge loans to buy a house in Colorado. You'll learn about qualification requirements, costs, and finding the right lender that matches your needs.
What is a bridge loan and how does it work in Colorado?
A bridge loan becomes a great way to get financial support for homeowners who need to buy a new property before selling their current one. This specialized financing works perfectly during those tricky transition periods in real estate.
The meaning and purpose of bridge loans
A bridge loan provides short-term financing that "bridges" the gap between buying a new home and selling your current one. Lenders typically offer these loans for six months to a year, and some extend terms up to three years.
Bridge loans serve several key purposes:
- They let you tap into your current home's equity for a new property down payment
- You can make competitive offers without contingencies in hot markets
- Moving twice in a short time becomes unnecessary
- The pressure to sell before buying disappears
Your dream home search becomes easier with a bridge loan because you can act fast without waiting to sell first. These loans also help if you can't qualify for two mortgages or want to avoid double mortgage payments.
How bridge loans function in Colorado's real estate market
Bridge loans give buyers vital flexibility in Colorado's competitive housing market. The timing works well since homes stay on the market about 36 days in Denver County and 47 days in Jackson County.
Colorado offers two main types of bridge loans. You can refinance up to 70% of your existing home's value, clear your current mortgage, and use the remaining money for your new home purchase. High-value bridge loans over $1,000,000 sometimes use both properties as collateral.
Colorado homebuyers gain a big advantage with these loans. They can make strong offers without home sale contingencies, which matters a lot in Denver, Colorado Springs, and Fort Collins where multiple offers happen often.
Typical bridge loan terms in Colorado
Interest rates for Colorado bridge loans run higher than traditional mortgages because they're short-term and riskier for lenders. The rates usually range from prime rate to prime rate plus 2 percentage points.
Colorado lenders look for these qualifications:
- Two credit bureaus must show FICO scores of 680 or higher
- Your current home needs at least 35% equity
- Loan amounts range from $200,000 to $5 million
- Debt ratios can go above 50% DTI if underwriters approve
Detached homes can get loans up to 75% LTV for amounts under $1.5 million. Other properties usually max out at 60-65% LTV. The repayment schedule runs 6-12 months, and lenders don't offer extensions beyond one year.
Qualifying for a bridge loan in Colorado
Bridge loan approvals have different qualifications compared to traditional mortgages. Lenders consider these specialized loans riskier due to their short-term nature, which leads to unique requirements.
Credit score and income requirements
Your credit history is a vital factor in bridge loan approval. Colorado lenders want to see a minimum FICO score of 680 from at least two major credit bureaus. Your chances of approval improve significantly with scores of 700 or higher.
Lenders need proof that you can manage multiple property payments at once. Your debt-to-income ratio should stay below 50%, though requirements vary by lender. This ratio includes payments for your current home, bridge loan, and new residence.
Colorado lenders show flexibility in their programs. Some allow DTI ratios up to 50%, subject to underwriter approval.
Home equity needed for approval
Your current home's equity level forms the basis for bridge loan approval. Colorado lenders expect you to have built at least 35% equity based on your home's appraised value.
Loan-to-value restrictions work this way:
- For detached single-family homes: Maximum 75% LTV for loans up to $1.5 million
- For other property types: Usually 60-65% LTV
Most lenders cap borrowing at 80% of your current home's value. This equity requirement will give a substantial financial stake in the property used as collateral.
Documentation you'll need to provide
The right paperwork can speed up your bridge loan application process.
You should have:
- Income and employment history proof that shows your repayment ability
- Current mortgage statements with existing loan balance
- Property valuation documents (desktop appraisal with exterior inspection)
- Credit reports from major bureaus
- Listing agreement of your current home on the market (some lenders require this)
- Completed ACH/transfer form with voided check for automatic payments
Documentation needs vary between lenders. Ask about specific requirements before you apply.
Bridge loan costs and considerations in Colorado
Bridge loans in Colorado come with special cost structures. Every homebuyer needs to think over these costs. You'll want to understand these expenses upfront to see if this type of financing works for your needs.
Current bridge loan rates in Colorado
Bridge loan interest rates are nowhere near as low as conventional mortgages. Across Colorado, rates usually fall between the prime rate and prime plus 2 percentage points. Your financial profile and property details play a big role in the actual rate you'll get.
Borrowers who know their way around real estate might qualify for rates as low as 5.75%. Most people end up with rates between 9% and 12%. Some Colorado lenders might charge up to 15% for certain properties.
The Colorado Lending Team has more competitive programs available. They offer 4.50% rates for loans with less than 80% combined loan-to-value (CLTV) ratios. This jumps to 5.50% when CLTV goes above 80%.
Closing costs and fees to expect
The total cost of bridge loans goes beyond just interest rates.
Here's what you might pay:
- Origination fees range from 1.5% to 5% of the loan amount, with Colorado lenders typically charging around 2.9%
- Loan processing fees usually include a flat $500 origination fee
- Appraisal costs for your current home
- Potential renewal fees ($2,000 for six-month extensions with some lenders)
Comparing costs with traditional mortgages
Bridge loans might make good financial sense in many cases, even with higher rates. These loans let you make interest-only payments, which means lower monthly payments while you're between homes.
Bridge loans only last 6-12 months, unlike traditional 15-30 year mortgages. You might end up paying less total interest because of this shorter term, even with the higher rate.
The balloon payments at maturity are a big risk with bridge loans. If your current home doesn't sell when you expect it to, you could find yourself in a tough spot. This is why lenders charge premium rates for this specialized financing.
Finding bridge loan lenders in Colorado
The right lender for your bridge loan needs is out there, and your options range from local banks to specialized mortgage companies across Colorado. Let's get into your best choices and what you should think over when picking a financial partner.
Local banks offering bridge loans
FirstBank is a go-to bridge loan provider in Colorado that focuses on convenient, short-term financing for homebuyers caught between properties. Their loans help borrowers who can't qualify for two mortgages or want to avoid simultaneous payments. FirstBank lets you use your current home's equity as a down payment for your new property.
Bank of Colorado provides bridge financing solutions that work well for homebuyers in transition. They put a strong emphasis on customized guidance through the whole process and help you understand if a bridge loan matches your homebuying goals.
Mortgage companies with bridge loan programs
Fairview Lending leads the way in bridge loans throughout Denver and Colorado. Their COO, Glen Weinberg, is known as an expert in bridge loans and non-conventional financing. Fairview focuses on short-term loans that last from 6 months to 3 years.
Montegra Capital offers bridge loans with interest rates starting at 8% and loan fees between 1.5% and 3%. They structure payments as interest-only to keep monthly obligations low and can close within 3-4 weeks from your first request.
Colorado Loan Pro gives you multiple bridge loan options. You can choose between interest-only monthly payments, 12 payments collected at closing, or no payments until your home sells.
Questions to ask potential lenders
Of course, ask these questions before committing to any bridge loan:
- Do you offer alternatives to standard bridge loans?
- What are the interest rates and fees for extending loan terms?
- How fast can you process and close the loan?
- What happens if my current home doesn't sell within the loan term?
- Can you explain all closing costs and fees upfront?
Local lenders know Colorado's unique market conditions and often spot value where nationwide lenders might miss it. Working with a lender who knows regional real estate trends gives Colorado homebuyers a real advantage.
Bridge Loan Solutions with Clear Rate Mortgage – Prequalify Now!
Bridge loans help Colorado homeowners buy a new home before selling their current property. These loans have higher interest rates than traditional mortgages but give you flexibility when you need to move quickly.
Your success with bridge loans comes down to good planning and working with the right partner. Many Colorado homebuyers find these loans worthwhile—especially in fast-moving markets where strong, no-contingency offers matter.
At Clear Rate Mortgage, we understand local conditions and can guide you through every step. A bridge loan is best used short-term, so you’ll need a solid strategy to repay it—typically by selling your current home.
Think a bridge loan fits your plans? Clear Rate Mortgage is here to help you explore your options and make confident moves. Prequalify now!
FAQs
1. Can a bridge loan be used for a second home purchase in Colorado?
Yes, a bridge loan can help you buy a second home while waiting to sell your current one. This financing gives you flexibility when juggling two properties temporarily.
2. Do bridge loans require an appraisal in Colorado?
Most lenders require a property appraisal to determine the available equity. This helps them assess the risk and approve your bridge loan accordingly.
3. Is a bridge loan better than a home equity loan for short-term needs?
A bridge loan is often preferred when timing is critical and you plan to sell soon. It’s designed specifically for quick transitions between homes.
4. Can I rent out my current home while using a bridge loan?
Some lenders allow this, but they may adjust terms depending on rental income. Always check with your lender to understand their specific policy.
5. Are bridge loans only available through mortgage companies?
No, both banks and private lenders offer bridge loans in Colorado. Each option may have different terms, so it’s best to compare before choosing.
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