Buying your next Costa Mesa home while you still own your current one can feel like a puzzle. You want the right house, a smooth timeline, and a plan that protects your budget. The two most common tools are a bridge loan and a sale contingency, and each trades different costs and risks. In this guide, you’ll learn how both options work locally, what sellers look for, and a clear way to choose the path that fits your goals. Let’s dive in.
Bridge loan vs. sale contingency: What they are
Bridge loan basics
A bridge loan is short-term financing you use to buy your next home before your current home sells. The loan typically lasts a few months up to 12 months. Many products are interest-only and come with higher rates and fees than a standard mortgage. You usually repay the bridge loan with the proceeds when your current home closes.
Lenders underwrite your credit, income, and available equity. Some require you to show you can carry two payments or have strong reserves. Timelines vary, but in competitive markets many buyers use a bridge loan for about 3 to 6 months.
Sale contingency basics
A sale contingency makes your purchase contract dependent on selling your current home by a set date and terms. In California, standard forms and timelines are common. Sellers can accept, reject, or counter your contingent offer. Many add a “right to continue to market” or kick-out clause, which lets them keep showing the home and accept backup offers if needed.
You place an earnest money deposit in escrow. Your deposit is usually refundable until you remove the contingency under the terms of the contract. Once the contingency is removed, escrow moves toward closing on a typical 30 to 45 day timeline.
Costa Mesa market reality and why it matters
Costa Mesa and greater Orange County are high-cost, high-demand markets with limited inventory compared with buyer demand. In many neighborhoods, sellers prefer offers with fewer contingencies, quicker closings, and strong proof of funds. That is why a non-contingent offer or one backed by a bridge loan can stand out.
Market pace varies by neighborhood and price range. Some listings move quickly, while others take longer. Your strategy should match the speed of the segment you are targeting and the time you expect your current home to take to sell.
Buyer view: pros and cons of each path
Bridge loan: advantages
- Stronger offer in competitive areas because you can write non-contingent or less contingent terms.
- Avoid moving twice if you can close on the new home first.
- More timing control, which can help you secure a house you love.
- Possible negotiating leverage if a seller prefers certainty.
Bridge loan: trade-offs and costs
- Higher rates and fees than a standard mortgage, plus appraisal and closing costs.
- You may carry two housing payments for a period, including taxes, insurance, and utilities.
- If your home takes longer to sell, you might need an extension or feel pressure to accept a lower offer.
- Underwriting can be strict. Some lenders require the bridge to be paid off before they approve your long-term mortgage or they may require larger reserves.
- Tax treatment of interest can be complex. Consult a tax advisor.
Sale contingency: advantages
- Lower direct cost. You avoid short-term loan fees and usually use sale proceeds for your down payment.
- Less financial risk since you are not holding two properties at the same time.
- Simpler financing because you skip short-term debt.
Sale contingency: trade-offs
- Weaker offer in competitive settings. Sellers may favor non-contingent buyers or ask for stronger deposits and higher prices.
- Kick-out clauses are common. You might be asked to remove your contingency within a short window if another offer appears.
- Timing uncertainty can force you to find temporary housing if closings do not line up.
Seller view: what your Costa Mesa seller is weighing
Buyer using a bridge loan
- Pros: Faster, cleaner closing if the buyer’s financing is solid. Less risk of delays caused by the buyer’s sale. Sellers may be more confident in accepting.
- Considerations: If the buyer’s financing fails before closing, the deal can stall. Sellers want proof of funds and lender letters to reduce risk.
Buyer with a sale contingency
- Pros: Expands the buyer pool in certain price bands. Sellers can use a kick-out clause and keep marketing.
- Considerations: More uncertainty and a longer path to closing. If the buyer’s sale falls through, the purchase may cancel.
Costs, timelines, and risk management
Typical bridge-loan path
- Pre-approval and product selection from a lender, including written terms and fees (about 1 to 3 weeks).
- Make a competitive offer and open escrow. Target 30 to 45 days to close the purchase.
- List and sell your current home. Repay the bridge loan from the sale proceeds.
Key costs include the interest rate, origination and closing fees, and carrying costs for two homes. Ask lenders for a full cost sheet, including any extension fees and prepayment terms.
Typical sale-contingent path
- List your current home and begin marketing. Time to sale varies by price tier and condition.
- Submit a contingent offer with a defined contingency removal period, often 14 to 45 days.
- Seller may accept with a kick-out clause. Be ready to remove your contingency quickly if the seller gets another offer.
- Once your sale is under contract and you remove the contingency, expect 30 to 45 days to close on your purchase.
Risk management starts with realistic timelines and backups. If your sale might take longer, plan for a longer contingency window or consider a rent-back to bridge a gap.
Alternatives and hybrid strategies
- HELOC or home equity loan. Tap equity in your current home for your down payment. Rates can be lower than bridge loans, subject to lender rules and your equity position.
- Rent-back or delayed possession. Negotiate to remain in your home for a short period after closing to align both moves.
- Backup offers. If you sell to a buyer with a contingency, keep a qualified backup to reduce downtime.
- Bridge plus contingency. Some buyers combine both to hedge risk. This is more complex and can be costlier.
How to choose the best path in Costa Mesa
Start with two questions: How competitive is the segment you want to buy in, and how fast can your current home sell? If you are targeting a hot neighborhood and have strong equity and cash flow, a bridge loan can improve your odds. If cost control is your top priority and your timeline is flexible, a sale contingency may be a better fit.
Talk with a lender about qualification while you still own your current home. Policies vary. Then review recent local sales activity with a knowledgeable agent so your strategy and timeline match real market conditions.
Buyer and seller checklists
Buyers: questions for your lender and agent
- Will you approve my new mortgage while I still own my current home? On what basis?
- What bridge loan or equity products are available, and what are the total costs, including fees, interest, and any extension charges?
- How long will approval and funding take, and what documents do you need from me?
- How will a bridge or HELOC affect my long-term mortgage later?
- What contingency period is realistic for my price range, and how should we handle a kick-out clause?
Sellers: protect your timeline
- Ask for written proof of the buyer’s financing or bridge loan approval.
- If you accept a sale contingency, include a short kick-out window, often 48 to 72 hours.
- Keep marketing active and consider backup offers.
- Request firm deadlines for contingency removal and closing.
Documents to collect and review
- Lender pre-approval and any bridge or equity loan commitment letters.
- The purchase agreement’s contingency language and any kick-out clause wording.
- Escrow instructions with clear dates for contingency removal and closing.
- Evidence of listing activity on the buyer’s current home if your sale depends on their sale.
Putting it all together
Both options solve the same problem. A bridge loan trades higher cost for a stronger offer and better timing control. A sale contingency trades competitiveness for lower financial risk and simpler financing. The right choice depends on your target neighborhood, your tolerance for carrying costs, and how quickly your current home can sell.
If you want a clear, local plan for Costa Mesa, our team can help you weigh timelines, buyer expectations, and negotiation strategies so you protect your bottom line. Connect with the Lily Campbell Team to map your best path and move forward with confidence.
FAQs
How does a bridge loan work for Costa Mesa buyers?
- A lender provides short-term funds so you can buy before you sell, then you repay the loan from your sale proceeds, often within 3 to 12 months.
Are sale contingencies accepted in Costa Mesa right now?
- It depends on the neighborhood and price range; in competitive segments sellers often prefer non-contingent offers or add kick-out clauses and short deadlines.
How long do bridge loans usually last?
- Most run a few months up to 12 months, with many borrowers aiming to repay in about 3 to 6 months once their current home closes.
What is a kick-out clause in California purchase contracts?
- It lets a seller accept your contingent offer but continue to market the home and require you to remove the contingency within a set time if another offer appears.
Can I get a bridge loan if I plan to rent out my current home?
- Some lenders will consider it, but investment property underwriting is often stricter and rates can be higher, so confirm policy early.
What happens if I cannot remove my sale contingency in time?
- The seller can cancel under the contract terms or require you to remove the contingency and proceed, which may put your deposit at risk if you cannot close.
