The steps to “moving up” or “sizing down” can be a daunting and confusing one. Do you sell first? Buy first? When is a good time to talk to a financial institution about your plans? When does a real estate agent come into the picture? You may not know where to start. However, I want to reassure you that a good plan can be your best asset.
Oh, the Great Housing Dilemma. The thought of it can brings so much anxiety. Remember that the overall goal is to maximize the selling price of your home and find a new one for a reasonable price. However, If you sell your current home first, where will you live until you find a new one? If you buy first, you are stuck with paying two mortgages– that is, if a lender has the ability to offer you a second mortgage.
Options during this transition may involve:
Borrow down payment money for the second house from family or friends. Point out that you need help for only a short period, and offer a competitive interest rate. Give the person making the loan a promissory note, secured by a second mortgage (deed of trust) on your new house. Try to arrange it so that no monthly payments are due until your first house sells. Be warned, however, that depending on your financial situation, institutional mortgage lenders may refuse to approve a loan where the down payment doesn’t come from your own resources.
Get a bridge loan from a financial institution. If you have no other choice, it may be possible to borrow money from a bank or other lender to bridge the period between when you close on your new house and when you get your money from the sale of your old one. This idea is that you take out a short-term loan on your existing house, using it toward the down payment and closing costs on your new house, and repaying it when your first house sells.
Bridge loans can, however, be far more expensive than regular mortgage or home equity loans (higher upfront payments as well as interest rates), and they’re not easy to qualify for — you have to have plenty of equity in your current home and enough income to pay both mortgage payments indefinitely. The requirements all but negate the benefits of the loan!
First things first, evaluate the housing market with a trusted licensed real estate agent like myself. I can give you current market value for your home to sell as well as advise on what is on the market for your next home. With the marketing that I can do early on, I may be able to secure a buyer while you are preparing your home for sale. I currently have an active listing that I “pre-marketed” for 3 months and accumulated interested buyers. Now the home is actively for sale, we have multiple offers! Multiple potential buyers who are interested in the listing will sell the home very quickly.
I am happy to do “Seller Net Sheets” that allow you to see estimated values of what you will net. Talking to a lender will also determine what the lender feels your budget should be. This allows you to know what is a reasonable next purchase should you need or desire to finance that purchase. My goal is to get all of the information and planning done upfront so the transaction is seamless when we decide to proceed.
If you still have questions, I’m here to help! Call me at 480-466-8193. Erin Newman