How do I finance a house down payment while I am still making payments on the home I am trying to sell?

Question

The buyer for our home just backed out and we have to close next Friday on the house we had made an offer on. We don't have enough cash on hand without our equity in this house to make the down payment. Is there anyway we can get a loan to make the down payment so we can move ahead with the purchase. I would rather not get a bridge or finance 100%.

Answer 1

Good evening. Your best option is going to be to do an 80/20 combo loan. This way you will finance an 80% first mortgage and a 20% second mortgage/home equity line of credit. In essence this is a 100% loan but you can use the proceeds of the sale of your home (whenever you sell it) to pay off the 2nd mortgage/home equity line of credit.

Another option is to borrow from a 401k if you have one. You can take a loan out on your 401k and simply pay that money back once you sell your home. If you have an IRA, you can take out a 60 day loan on that as long as you have it paid back within 60 days, which could potentially be risky if you can not pay it back within that time.

Last option, and least recommended, is to borrow from credit cards, take out a personal loan, borrow from family, etc... This may be a quick fix and can possibly solve your short term problem. Many credit card companies offer specials on cash advances periodically, so call around and ask your credit card companies if they have anything going on right now.

As someone else stated, you should have had a clause in your contract that stated you buying the home was contingent upon selling your home. Although some sellers will not accept bids with this clause in their contract because this could potentially place them in a bind as well if you need to back out. Best of luck and I hope the information helps. See the links below about down payment ideas.

Answer 2

If you have significant equity in your current home you could do a very low interest rate home equity line of credit. Use that to make a down payment on your new home. It's risque and I wouldn't usually recommend it but it sounds like you're locked in on the new one. Ask you Realtor (If you have one) to request a delay on the closing date. If the seller agrees, it can buy you time to resolve this. Or, if the gamble is too much. Back out of the deal (with potential consequences). Read your contract thoroughly. How much was your deposit and what are the penalties for breaching the contract? Or, you could do 100% loan as an 80/20 split and if you have enough to cover the 20% second loan, pay it off once you sell the former home. You might have to pay for mortgage insurance until you pay the 20% off. The risk there is that if you don't sell quickly, you will have to consider the carrying cost of the first home that has not sold. It's a tough scenario you have there. Best of luck!

Answer 3

When you make an offer to buy the new house, you should include a subject clause - "This offer is subject to the buyer being able to sell his house on or before....". Your Realtor has made a big mistake!

Now your best chance is to use your home to get a loan to make the down payment. If this is not possible, you may want to talk to the seller and see if he can extend the closing date until you sell the house. More often than not, the seller would cooperate, because it is too expensive and pointless to take legal action when you do not have the money to close.

Answer 4

Pay down the $10,000 in unsecured debt. It gives you a much better credit score and debt-to-income ratio, so you'll be qualified for better loan products. You'll also have the extra cash on hand (the money you're saving above the $10,000 to pay off the debt) for a down payment, closing costs, new household goods, etc. One thing that lenders do when looking at your outstanding debt is to consider the original amount of the loan as the indebtedness. For example, let's say you have a $20,000 car loan, but only owe $2000 on it (it's nearly paid off). That debt counts as the $20,000 of the original loan, not the $2000 that you still owe on it. No, it doesn't make sense. But, that's how they do it. And, that's one reason why paying down debt before you buy a house is better than saving cash. You can still find loan products where you don't have to put any money down (or very little) by taking out a first mortgage and then a second for the down payment (to keep you under 80% loan-to-value on the first to avoid PMI). When you get ready to buy, contact a mortgage broker to get prequalified. At that time, you can find out what all loan products you qualify for. But, paying down that unsecured debt is your best move.

Answer 5

Hi:

It looks to me like you need a short term loan. Assuming you have a good amount of equity in your current house, get a "hard money loan." It is very expensive, but you can get money over night and it can save your deal.

You get a hard money loan from a private investor. In many cases they can charge 4 points and 14% interest. With that, all terms are negotiable.

Most mortgage brokers will be more than happy to find you such a loan.

I wish you much success.

Jonathan

Answer 6

You can make a privet loan from your bank. Most of the time they will do this kind of loan because there is equity in your first home. Or you can take out a line of credit on your first home. You really should talk to your mortgage person or a lawyer.

Answer 7

you can get a loan to pay the payments on the house, but you need to go to a bank that will allow you to up the amount of the loan if you need to.. start out by asking for x amount, but explain that if your house doesn't sell then you may need to borrow more, untill it does sell. be honest and up front about what the loan is for and how you would like things to work out with the loan.

Answer 8

You have just said "No" to the only two options available to you in this situation, unless you have a wealthy old auntie sitting in a corner who is willing to write you a check.

Engaging a bridge loan is exactly what you say you want to do, while saying you do NOT want to do it. I don't get it here.