Putting your home on the market, applying for financing, finding a new home, and coordination of these efforts in addition to the routines of normal daily life can be a bit overwhelming.
For some people, knowing where they are moving to is less stressful than the unknown-or the idea that if they can't find what they want prior to closing their existing home they may have to move twice. And, some people can afford two house payments if necessary. So a lot of the decision is up to individual preferences and the reality of individual financial situations.
No one wants to move twice. That is a fact. Many if not most people put their homes on the market and allow prospective buyers to see the home while they are also out looking for a new home. So the problem arises when the next home is found, but the old one isn't sold yet. What to do?
For people who can't afford two house payments the only thing to do is make what is known as a contingency offer-i.e. the offer they are tendering is subject to the sale and closing of the property they are selling within a certain amount of time. In an active market this type of offer isn't the most appealing offer for a seller. However, some sellers will entertain the possibility as long as a "first right of refusal" is written into the contract so they don't tie up the house and make it impossible to accept another offer that can close more quickly. What occurs is that they accept the initial offer, but leave the home on the market for other offers. The first buyer has the first right of refusal should another offer come in. The first buyer then can, if they choose (and if financially possible) move forward to close without selling their current home first. Should they decide not to do so, then they will be released from their commitment to buy the home and the second buyer will get the house. This works for many people but it is a bitter pill to swallow to lose the dream home while waiting on the sale of the current home.
The second possibility for those who can't or don't want to be stuck with two house payments is to get their current home under contract for sale prior to writing an offer on another home. This can put the buyer in a time crunch to find acceptable housing. In this scenario the buyer may want to consider the possibility that they will have to move twice. Once into short term housing or into a relative's basement. Not an attractive idea but if a buyer doesn't want to make a fast decision or can't find something they like this takes the pressure off.
The third possibility is that the borrower is affluent enough that they can afford to make two house payments. This isn't the most desirable option for anyone, but particularly if the current home is priced to sell it may be a realistic choice.
Some folks hang onto their current home to use as a rental. Again, you need to be sure that you can afford both house payments in your debt ratios. Rent can't be counted as a wash against a mortgage payment unless the home has been a rental property and reported as so for two years on tax returns. In addition if the applicant is using FHA to purchase the new home, the current home can not have an existing FHA mortgage and must have 25% equity between its value and what is owed. (No, they don't make it easy on you.)
Sometimes there are no good options-so all you can do is choose the one that is best for you. Doing so should at least give you a plan of attack and turn this
into
It's all in how you frame the problem-right?
No comments:
Post a Comment