selling one home and buying another question (loan, real estate, approval)

[bgmv90]

This is purely a sample question. After reading various posts, I'm just totally confused how other people usually do things when selling houses and I want to make sure that I have a sense of how things are done and what to expect. Or maybe advice or other experiences from people who have sold a house before and moved.

If a person owns and currently lives in their house, maybe they have a mortgage on it. Then they want to move to a different house so they have to sell the house they are currently living in and buy the new one. They have to provide the down payment or whatever for the new one that is required.

So my questions are...Do they have two mortgages at once? Or do they somehow combine? Do they have two different lenders? Or do they pay off the first houses mortgage when it sells? How do they buy a different house when they already have a mortgage on the first one? I'm totally confused at how all this works. I think I might be over thinking or misreading things.

Thanks.

[Bill Keegan]

Originally Posted by bgmv90

This is purely a sample question. After reading various posts, I'm just totally confused how other people usually do things when selling houses and I want to make sure that I have a sense of how things are done and what to expect. Or maybe advice or other experiences from people who have sold a house before and moved.

If a person owns and currently lives in their house, maybe they have a mortgage on it. Then they want to move to a different house so they have to sell the house they are currently living in and buy the new one. They have to provide the down payment or whatever for the new one that is required.

So my questions are...Do they have two mortgages at once? Or do they somehow combine? Do they have two different lenders? Or do they pay off the first houses mortgage when it sells? How do they buy a different house when they already have a mortgage on the first one? I'm totally confused at how all this works. I think I might be over thinking or misreading things.

Thanks.

The most common course of action is to get a mortgage approval for the new house that is contingent upon the sale of the first house and the payoff of it's mortgage note. As long as everything is well controlled, you can close both transactions on the same day. Sell the house & pay the note in the morning, get the loan to buy the new house in the afternoon.

[Whyfor]

Originally Posted by bgmv90

So my questions are...Do they have two mortgages at once? Or do they somehow combine? Do they have two different lenders? Or do they pay off the first houses mortgage when it sells? How do they buy a different house when they already have a mortgage on the first one? I'm totally confused at how all this works. I think I might be over thinking or misreading things.

Thanks.

As with most things, the answer falls somewhere in the realm of "it depends on the situation".

But to try and answer for you a bit, I would say:

Do they have two mortgages at once?

Not usually. Most people can't afford this, esp with down payment and such. However, you might find a situation where you do have 2 payments for a month or two until your old house closes.

Or do they somehow combine?

Definitely not, for a multitude of legal reasons.

Do they have two different lenders?

This would probably be up to you to decide.

Or do they pay off the first houses mortgage when it sells?

That is what happens in the vast majority of cases.

How do they buy a different house when they already have a mortgage on the first one?

Many times, people who are buying a different house will put into their offer that the offer is "contingent" upon the sale of their old house. That is, the purchase of the new house will not go through until someone buys the old house. There are complications with this approach, especially in the current housing climate (ie the seller of the "new" house may not be willing to wait until your current house sells, because who knows how long that might take....).

Certainly if you're going to be carrying 2 mortgages for any period of time, I would think the bank will be quite strict in making sure you have the income/savings to handle it.

I'm totally confused at how all this works. I think I might be over thinking or misreading things.

Don't sweat it. I hope I helped at least a little. Mind you, there are many different possibilities and it depends a great deal on the financial situation/circumstances.

And just for the record, I've bought 2 houses. The first was in 2005 , and we had been renting before that. We moved from that house about a year and a half ago. We made an offer on a new (never lived in) house that was contingent upon the sale of our old house (there was no way we would have been able to carry 2 mortgages). The builder accepted. As a result, we rented while waiting for our old house to sell, which took about 5 months. Once the old house went through closing, and everything was recorded/paid off, only then did we proceed to close on the new house.

[SmartMoney]

OBSERVATIONS AS A LENDER: It's far harder to sell your current home than to find a home you like and that will take a contract contingent on the sale of your home, even if it's under contract. I would concentrate more on the sale, with the idea you may have to do a short term rental with possessions in storage.......yes, you and the wife and kids and the pregnant cat. If you aren't one to "go with the flow" and you must have absolutes, then change the word "may" to "should." We all would love to have the perfect scenario, but I haven't seen perfection in a long time, especially if your purchase is a short sale. Go into the process with low expectations so that there is greater room for a pleasant surprise, not the other way around and experience greater disappointment.

[bgmv90]

Thanks for all the advice, it is starting to make a little more sense now.

[acegolfer]

Here's what we did 2 years ago when we moved from NY to FL.

1. Listed my house (house A) at a very attractive price.
2. Under contract within 2 weeks.
3. Went to house hunting. Find a nice house (house B).
4. Offered a purchase contract contingent on closing house A. (We attached executed contract on house A, when we offered to house B.)
5. Closed house A.
6. Moved into a temporary housing (we were moving out of state)
7. Closed house B.

If your 2 closing dates are too apart, you may consider post-closing renting or pre-closing renting to avoid temporary housing.

[marcusbrady]

When you purchase your dream house before selling first one and it also minimize your financial hazards. The selling your house and buying another your existing mortgage is paid off and new one is started for new house.....[i]

[ezzy]

I think there's a credit issue as well. I'm no expert in real estate, but I think if you owe a substantial amount on your previous home, or if you credit is not so great, you may not be able to get a loan for the new home.
The ideal thing to do is to get rid of the current home first.

[Ceece]

The agents make sure it all works out. We used one agent to sell our home (a local specialist) and another to buy a home in our new city, someone we met at an open house and clicked with. She found us a home right away then before submitting a contingency offer she went to look at our old one to make sure it was priced right and in good condition to sell. I suppose it would be easier to use the same agent to sell your old home and buy your new one but that isn't always possible.