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How do people qualify for a new loan before the sale of their existing home? this doesn't affect me because I own my home outright but if I had a mortgage, how would I get financing? For example...
Say I had a $2000 a month payment on the existing home including property taxes. And my monthly income was $8000. With no other revolving debt, my ratios would be 25/25. But if I wanted to buy a new home and the existing one had not sold yet, Those ratios would be 50/50 and no bank in their right mind would lend the money.
So how do people who live in one house buy a new one to move into without first selling the old one? Especially in a slow market like the current one, a person could be sitting on a house for months before they could sell.
...So how do people who live in one house buy a new one to move into without first selling the old one? ...
They don't unless they can show they can afford both mortgages. Loan qualification will take into account all current debts, including their current mortgage.
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Especially in a slow market like the current one, a person could be sitting on a house for months before they could sell.
That's right, and happens frequently. However, if it's taking months to sell, then they need to adjust their price. If the price is not what they want to sell at, then take it off the market.
Some builders/sellers will accept a contingency offer meaning that (in the case of new construction) the builder will begin construction of your home based on you being able to sell your current home within a pre-determined time frame. However you as a buyer must make efforts to get your home sold asap.
As noted by BiggJoe, a buyer can make a purchase offer contingent on selling their current home, and the lender can provide loan pre-qualification with the sale as a contingency to full approval. It's then up to the seller to take such a contingent offer or not. However, in this market most won't unless the buyer can at least show they have a contract for their home.
Many things come into play including their current assets. You don't know about their investments, 401k, IRA, or anything else like that. Some lenders will lend just on you have the money available to you even if it's not liquid, and then they hold the assumption you will sell your current house to help free up other reserves.
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