Work

Moving Up: How To Sell Your Home (or Rent It) and Buy Another One

Buying your first home probably seemed complicated and overwhelming, but transitioning from your first home to your second home can be lot more difficult without the proper guidance.

When you purchased your first home, you were renting a house or an apartment.  Even if you had a lease that had not yet expired, worst case scenario would be paying a couple of months’ rent in order to get out of the lease.  You didn’t have to worry about selling a house and the timing of that selling.

Also, there are a lot of great first-time home buyer programs offering incentives like 100% financing, lower down payments, and grant money.  When you are moving up to your second home, you will have to plan a little more to come up with down payment funds and coordinate all of the moving parts.

Talk with a Realtor

Start by talking to your Realtor about selling your house:  Will it be easy to sell?  How much is estimated you will net from the sale?  Is it recommended you list your home before you look for your next home or go under contract on your next home and then list your current home?  Will it be difficult to get the home you want if your offer is contingent on selling your current home?  Much will depend on your home and the market conditions in your area.

Talk with a Mortgage Lender

The answers from the questions above will help you develop a financing plan with your mortgage lender. You may want to see if you can qualify for both mortgage payments first.  This way, your offer on your next home will be more competitive as you won’t have to wait for your home to sell before you close.  You will need to be prepared, in the event your home doesn’t sell before you close on your next home, to pay both mortgage payments until it does sell.

If you are unable to qualify for both payments at the same time or you need to sell your first house in order to come up with down payment funds, your lender will issue a pre-approval letter that is contingent on you current home selling.  You will need to wait for this to happen before you can close on your second home.  You can do a same day closing as long as the closing of your current home occurs before the closing of your next home.

Converting Your Current Home into a Rental

Many of my clients are choosing to convert their current homes into rentals.  If you can qualify for both mortgage payments on your own, this is no problem.  However, if your debt to income ratios are too high to qualify, it becomes trickier.  You may be able to lower them by using future income from your rental unit to qualify if you meet the following requirements:

  1. An appraisal shows you have at least 30% equity in your current home that you plan on renting.
  2. You have an executed lease agreement.
  3. You provide proof that you received the security deposit from the tenant.
  4. You can show cash reserves (funds available after you close to be used in an emergency).

If you are ready to move on up, feel free to email or call me at 804.386.9364 for a mortgage loan consultation.

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