I'll be honest, this program is a bit like dealing with a loan shark bookie in the back of a mechanic shop with a goon on each side of him. The program takes a desktop appraisal and property photos to determine the home's value. They will then offer a bridge loan based on the remaining equity in the home. They will leave a little room in the LTV to account for any costs they may incur, volatility, and hedge risk. Now that I've appropriately set expectations, let's dive in.
This program is offered by Homelight and charges 2.5% of the appraised value or listing price (not a lot of transparency in the lender guidelines, hence the "OR")NOT the loan amount that they give you. For example, let's use the following scenario where Buyer A is trying to purchase his home, despite his current residence not being under contract:
Departing Residence home value: 1 million
existing first lien: $300,000
Remaining equity available for lending: $700,000
e.g. HomeLight offers a bridge loan for $600,000 for $25,000 (2.5% of the list price) in origination fees. This is not an exact method of how they lend, merely an example
IF THE HOME DOES NOT SELL WITHIN 90 DAYS, HOMELIGHT WILL BUY THE HOME ITSELF THEN RELIST IT. They will recover their investment, plus fees, and then give anything over and above that back to the sellers.
Homelight does not negotiate the fees for originating the loan. It is perhaps one of the only loan products I'm aware of that charges fees based on something other than the loan size.
If you find yourself in a position where you need to utilize the program, let me know.
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