Buying your second home, and selling your first home?

Question

Prefer answers from those experienced in real estate sales or mortgages. Thanks!

We just bought our first home recently, but I am just curious how people manage the transaction of selling one home and buying their next home.

Do you have to buy first getting a mortgage based on your current income and whatever cash you have available to put down?

Do people sell first, moving their stuff into temporary storage and live in a temporary place so that they can use the cash from the sale of their first home in applying for the mortgage for their second?

Or does the mortgage company take into consideration that you are selling a home, so they assume you will come up with x dollars for down payment?

I kind of assume it is a combination of things...but what is best, in your opinion?

Answer 1

Most of the above, actually.

On your last option, they won't "assume" that you'll come up with a down payment but they'll happily give you a bridge loan on your old home so you'll have the funds for down payment and closing costs on your new one.

Bridge loans are typically payment free for 6 months and then interest only for another 6 months. This usually gives you enough time to sort out the sale and clear the bridge loan.

Although you can't normally borrow money for the down payment, a bridge loan is the exception. You usually get your bridge loan from the same lender that is financing your new home.

There's another option, though. If you've saved up enough for the down payment on your next home you can keep the old one and rent it out. In many areas rents are higher than mortgage payments and you can get a nice little positive cash flow and a nice tax deduction as well. Normally if you own rental properties the mortgage companies consider it a wash as long as your rental income covers the mortgate payments. They don't consider the rental income as income, but they don't consider the mortgage in evaluating your income to debt ratio either. I acquired a nice real estate portfolio over the years that way.

Answer 2

I am in the process of selling my first home and buying a second home. My goal was to do both at the same time so I did not have to hold two loans or get temp housing.

The first thing I did was get preapproved for a mortgage from a lender(very easy). Next I put my existing home on the market at a fair(but not necessarily low) price in hopes that it would sell quickly. I also did some work to my house so that it would show well.

I started looking for homes as soon as my existing home was on the market and found a few that I would like to make offers on. However to make a serious offer I needed some interested in my existing home.

After a few weeks a couple made an offer on my home and as soon as the contract was drawn I put an offer in and then signed a contract on a home I wanted to purchase. Both settlements will occur on the same day.

The important part is that I put a contingency in the contract for the home that I wanted to purchase that if the deal with the house that I was selling did not go through then I do not have to purchase the home.

The sellers were not exactly thrilled with this contingency but they accepted the offer, remember its a buyers market right now. This coming Wedns I plan to sell my existing home in the morning and take some of the profits to put down money on the home that I am going to purchase in the afternoon.

Its been a very stressful process but just about everything has been cleared and the settlements should go fine.

Answer 3

Most people can't afford two house payments so they have to sell their current home first. When you make an offer on your new home, you can add a statement that your offer is contingent upon the sale of your current home.

If you don't want to do that, you could qualify for a mortgage for your new home by providing proof that you will lease out your present house. You can do this with a signed lease agreement.

Mortgage lenders would never assume you could come up with the cash needed--you will always have to prove that you have it in order to be approved.

Rick Lanicek
www.primelendingonline.com

Answer 4

dont think you can remortgage and then rent the flat - you would need a buy to let mortgage (which costs more) Assuming you could get an MI mortgage So you would now have the mortgage on the flat + the mortgage on the house to pay Presumably you are assuming the rent from the flat would cover the mortgage on the flat You do know the rent from the flat would be a taxable income (for your wife) AND the mortgage (interest?) is not a deductable expense? But suppose the rent aint paid (for example you dont rent it 52 weeks/year or the tenant just dont pay,) or it ISNT eniugh to cover the rent, what then? You are now at risk of losing both flat (more likely) and possibly house as well. (if the mortgage company repossess the flat and there is a shortfall in the amount they get for it, then they can force the sale of the house as well) The omens aint good - So far after 2 years you have not saved enough for a deposit on the house. That implies your income aint much higher than your outgoings. The option for you are basically- a choice between a risky strategy or another far less risky stategy The question is - do you feel lucky?

Answer 5

Sometimes (depending on whether it is a buyer's or seller's market) you can have a contingency in your contract that you will go to closing on your second home once you sell your first home. That's hard to get. It may be easier to sell your first home, move into an apartment (put stuff in storage), and then look for a new house. That way you'll have time to find the right place, and then you can be flexible on when you close. If moving to a different city or state, renting also gives you a chance to get to know the area before you buy.

Answer 6

My wife and I are n the process of selling our first home to buy our second home. We have place alot of things in storage to de clutter and show the house properly. also we will move to an apartment if we sell first. but if not and find our house, our contract will state the fact that we are selling and it is contingent upon sell of our first house.