How Does a Bridge Loan Work? A Texas Homeowner's Guide to Buying Before You Sell
You found the house. The one with the yard your kids already claimed and the kitchen your spouse has not stopped talking about. The problem? Your down payment is currently sitting inside the walls of the home you still live in. That is the gap a bridge loan is built to cross.
What a bridge loan actually is
A bridge loan is short term financing secured by the equity in your current home. You use it for the down payment and closing costs on the new house, then pay it off when your old house sells.
Most bridge loans run 6 to 12 months. Many are interest only during the term, meaning your monthly payment covers interest and nothing else, with the full balance due once the sale closes. It is not a long term mortgage and it was never meant to be. It is a plank across a gap you already know how to close.
A bridge loan buys you timing, not a permanent payment.
What it costs
Here is where people get surprised. Bridge loans price well above a standard mortgage. As of Freddie Mac's August 6, 2026 survey, the average 30 year fixed sat at 6.69 percent. Bridge financing commonly lands in the 8 percent to 12 percent range, depending on the lender and your profile. Add an origination fee that typically runs 1 percent to 3 percent of the loan amount, plus appraisal, title, and recording costs.
You will also need to show you could carry both housing payments if the sale takes longer than planned. Lenders want that cushion, and honestly, so should you.
Price the convenience before you commit to it. A few months of overlap costs real money.
What it takes to qualify
Bridge lenders look hard at equity. Most cap total borrowing at 80 percent of your current home's value, which means you need roughly 20 percent equity left standing. Beyond that, expect a strong credit profile, documented income, and a debt to income ratio the lender is comfortable with while you are carrying two properties.
Equity is the engine. If you are thin on it, a bridge loan probably is not your tool.
The Texas wrinkle worth knowing
Texas protects homesteads more aggressively than most states. Under the Texas Constitution, total debt secured against your homestead generally cannot exceed 80 percent of fair market value, only one home equity loan is allowed at a time, certain lender fees are capped at 2 percent of the principal, and these loans require a court order to foreclose.
Translation for you: how a bridge loan is structured against a Texas homestead matters a great deal, and not every lender handles it the same way. This is educational, not legal advice. The structure has to be reviewed for your specific situation.
Ask any lender specifically how they structure bridge financing on a Texas homestead.
This is a program we believe in. Our bridge loan has helped dozens of buyers land the house they wanted instead of watching it go to someone else. Back during Covid, almost nobody would look at a contingent offer, and that is when we really saw what this tool could do. It lets a client put the equity they already have toward the down payment and closing costs on the next house, with a payment structure built around the months before the old home sells. I love this program and the doors it opens for our buyers.
When it makes sense, and what else to look at
A bridge loan earns its cost when you are competing in a fast neighborhood and a sale contingency would sink your offer, or when you simply cannot move twice. But it is not the only path. A HELOC opened before you list, a sale contingent offer, a delayed closing, or a cash out refinance can each do the job at a lower price in the right situation.
Bridge loans solve a timing problem. Make sure timing is actually your problem.
Let's figure out whether this is your move
Every move up situation looks different, and the math changes fast depending on your equity and your timeline. Give me a call at 214.673.1319 or visit corecommunitymortgage.com and we will walk through your numbers together. No pressure, no jargon. Sometimes the answer is a bridge loan. Sometimes it is something simpler, and I will tell you that too.