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I am thinking of buying a second home but there isn't a great deal of web resources or blogs to read about how best to do this.
Questions:
1. Is there a website with a calculator to determine given a specific income level, whether a typical bank will still give out a loan to purchase a 2nd home first, and then put up our existing home for sale.
2. I have always wondered how people can still buy a new home without selling their existing home yet. Is there some type of approach that allows a "time period" for them to sell their old home while still being able to buy into their new home?
3. What are the best strategies today for moving up into a new home, given a bad market for "selling" ? My loan is current, and the value of the home is estimated to be the same as the current loan balance. 3 years ago, I had 20% down to purchase my home. So, yeah, I had my 20% down pretty much wiped out.
We saw a home which will suit us better with an extra room since our 3 yr will need a room for herself soon, and we'd like to buy it.
Looking for advice and ideas.....
Thanks in advance.....
Last edited by me4tux; 05-02-2010 at 02:26 PM..
Reason: minor edits
Our situation might be different than yours, however...
We moved out of house #1 in July 2009, rented in a new location and put up #1 for sale in August. We were working with a mortgage broker who told us what we'd qualify for while still owning #1, and with it unloaded. Needless to say, we aren't wealthy and we couldn't afford much by hanging onto #1... at least not enough to get a house we'd actually consider living in.
Luckily for us the house sold many months before we bought our new house. We didn't make as much off of it as we had intended when we bought it 3 yrs ago and renovated it, but it allowed us to move forward.
If you're serious about selling the house, drop the price and move on.
If you don't have any equity left in your current home (because your home dropped 20%/all of your downpayment).
If this is the case you will need to not only put a significant downpayment again for the second home but also prove you can carry both mortgages at the same time. This is regardless of whether you can rent out your current home (thanks to the buy and bail fraud that went on from early 2008 through 2009).
My advice: unless you can afford to easily carry both mortgages, sell your first home at a loss and move on. Or stay in your current home. Again be careful trying to carry two mortgages at the same time unless you are comfortable financially.
The way people use to buy up, was to go find a home, make an offer subject to their current home selling and settling ("with net proceeds not less than $xxxxx) and had language for the two closings to coincide. In market areas where there are not many properties for sale, sellers won't accept a contingent contract. If that is the case, then you could sell your home first and in the listing state "settlement to coincide with seller finding home of choice within 30 days." The latter is the preferred method in my area.
If you have no intention of trying to carry two mortgages at the same time, you can guesstimate your proceeds by taking your list price x .92% and subtract your payoff (if not known use your current balance + 1 month's payment, because your mortgage is paid in arrears). That will put you pretty close to your net proceeds. 20% is ideal, but in this market, not always possible. FHA will let you buy with as little as 3.5%. If you can come up w/ 5% or 10%, you may be able to find a combo loan, 80/10/10, and avoid PMI.
From my understanding, the best way to get a very competitive loan on a second house is to have the 20% down on both homes. A lot of folks are foreclosing on 2nd homes so lenders are weary of just throwing money out, due to the economy. (A lot of foreclosures also include those who just had too many houses at once).
From my understanding, the best way to get a very competitive loan on a second house is to have the 20% down on both homes. A lot of folks are foreclosing on 2nd homes so lenders are weary of just throwing money out, due to the economy. (A lot of foreclosures also include those who just had too many houses at once).
To add: Since the buy/bail fraud, lenders have become very strict. If you intend to keep both homes (assuming first home has less than 20% equity left after the housing crash), lenders will not count rental income.
You need to show them you can afford both homes at one time. Or as smartmoney stated above, have a contingency clause when buying your new home where you can back out if you can't sell your current home in "X" amount of days.
To add: Since the buy/bail fraud, lenders have become very strict. If you intend to keep both homes (assuming first home has less than 20% equity left after the housing crash), lenders will not count rental income.
You need to show them you can afford both homes at one time. Or as smartmoney stated above, have a contingency clause when buying your new home where you can back out if you can't sell your current home in "X" amount of days.
That is true indeed. The debt to income ratio is a huge thing so if you bought a house at let's say, 10-15% of your earnings, then you should be fine with going for a conventional loan on a house of similar value, assuming you have a great credit score, etc. Just like any loan, they are looking to make sure their end is covered. If you begin having money problems, it is more likely that you will begin defaulting on one loan or another so that's what they are considering. Also, an emergency fund is another strength to getting the rate that you want. They don't ask about cash assets and such just because they are bored
The way people use to buy up, was to go find a home, make an offer subject to their current home selling and settling ("with net proceeds not less than $xxxxx) and had language for the two closings to coincide. In market areas where there are not many properties for sale, sellers won't accept a contingent contract. If that is the case, then you could sell your home first and in the listing state "settlement to coincide with seller finding home of choice within 30 days." The latter is the preferred method in my area.
This.
My wife and I are helping my mother-in-law move closer using this method. Her Mortgage approval for the new home is qualified based on the assumption that the current home will sell (which is schedule to close in the same time frame). So they qualify her for the new mortgage assuming that the old one will be paid off. Obviously, if you dont sell your current home then you can't qualify, so you'd want to make the appropriate contingencies in your offer for a new place.
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