Selling 2 homes, buying 1. How to finance? (loan, 401k, heloc, credit score)

[PaleoBarbie]

Selling our home, and my mother's, we are all moving in together into a slightly larger home. Mother has almost great credit (785), we have poor (590-600). Each house is in $150k range, and each has about $70k equity in it. Looking for a $250k home. Our income $78k, hers is $51k (pension, soc. sec.). No one has debts, car payments, etc. other than the mortgages.

The hard part is our poor credit. How do we structure the financing to sell 2 while buying 1? It has been suggested that she get a HELOC (with her good credit) and then she buys the new home (will she qualify for a $250 home?).

We want to set up home as dual owner, with right of survivorship.

I would welcome any scenarios that might be beneficial to us. Please, if you have any input, I would be grateful.

We are in south central PA, if it matters

Warm regards, Barbie

[eweishaar]

I would have your mother soley purchase the new home on her own, with your credit scores all three of you would not qualify for a house together.

So the question becomes are you looking to buy the house now or wait until one of your home sells.

Your mother would have to be able to afford her current home, the new home, and if you access the equity in her home through a HELOC, then she will also have to pay for that payment per month.

If she makes $51k a year then her monthly income is $4,250 and most lenders are going to want to keep her debt to income ratio to 45%, now you can go higher to 50% but she would also have to have some kind of assets in cash reserves, more than likely 6-12 months of PITI payments in a savings account, 401K, etc.

So her TOTAL debt payments have to be between 1,900- 2,100 to make sure she can afford all payments on her income.

So if her current house payment, the HELOC payment, and the new mortgage are less than or in this range she should be able to qualify to buy the home now using a HELOC for the downpayment.

Also lenders may have requirements that she have more in cash reserves because she will be the owner of 2 or more properties with financing.

My suggestion is to wait until one of your home sells. Use the equity as a downpayment of at least 20% or more if both home sell at the same time. If your home sells first you can gift her the downpayment because you are a blood relative but you are going to have to put down at least 20% to meet the guidelines for a gift of a downpayment.

In regards to the title, your mother always has the option to add whomever she wants to her title in what manner she wishes. you and your husband can be added to the title without being on the loan or you can handle the title matter after closing, which ever title company you use can help you with the survivorship and being added to the title of the home

I hope this helps, good luck in buying your new home!

[PaleoBarbie]

Eweishaar - I just want to thank you for responding! You covered everything, and everything you said makes sense tome. Thank you for enlightening me
Barbie