How Do You Buy a Home When You Already Own One? | RealtyPin.com
NEW YORK, Feb. 18, 2013 /PRNewswire-iReach/ -- If you log onto real estate portal Realtypin.com, you'll see all kinds of home buying advice – from tips on what to look for in a home, to what you need to look for in a realtor, to what makes for a good mortgage.
But what if you've got a little bit of "baggage" with you? Specifically, what if you already own a home that you haven't been able to sell yet? Is it still possible to move forward and buy a new one?
Absolutely! You just have to approach the situation a little bit differently.
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In fact, this situation is more common today than it was a few years ago. Back during the housing boom, people were snapping up homes as soon as they were hitting the market. So, in many cases, people's biggest problem was trying to find a place to live after their home sold while they shopped for a new one! Today, though, homes aren't selling as quickly. So, if you're moving for a new job or some other situation where you absolutely have to move by a certain date, you could wind up owning two homes at once. Here's how you do it the right way:
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- Be prepared to answer some additional questions
If you're going to be paying two mortgages (even if it's just for a couple of months), the lender on your new mortgage is going to want to make sure you can swing it before they sign off on everything. After all, you're going to be paying double the payments to the bank, double the premiums to your homeowners' insurance company, and double the fees to your homeowners' associations. That can really add up quickly! In today's world – where lenders are being more careful than ever – they're going to want to make sure you can handle it all.
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- Give some serious thought to your new down payment
Typically, people use the proceeds from the sale of their old house to make the down payment on their new house. But if you haven't sold your old home yet, you don't have that luxury. So, how will you come up with 10% or 20% of the sales price (or even 5% if you're going for an FHA loan)?
One option is to take out a home equity loan on your existing house, use it to make the down payment, then pay the loan off as soon as your old house sells. That way, you've got the money you need and you won't have any extra debt hanging over your head once someone buys the old house.
Just remember – that home equity loan will count toward your debt-to-income ratio when your lender calculates everything to see if you qualify for the mortgage on your new home, so don't borrow any more than you absolutely have to!