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mommyoffive

How do you move when you own a house?

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Here is the story we still live in our first home.  When we bought we rented an apartment, so we didn't have to figure much out.  So give me all your tips and tricks on how you move to the next house.  We don't have this house paid off, but we have equity.  Do you use that equity for the downpayment and if so how?  Or do you have to have separate money for the downpayment?

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1 minute ago, happysmileylady said:

Are you selling the house you currently own?

 

 

Yes.  Sorry if that wasn't clear. 

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3 minutes ago, mommyoffive said:

 

Yes.  Sorry if that wasn't clear. 

No problem.  Sometimes people plan to keep their house, rent it, and then take out an equity loan, so that's why I was asking.

I am sure there are a lot of details that are involved with mortgage companies that I don't understand so my answers are pretty basic.  But your down payment is just your down payment.  The new mortgage lender doesn't care if it comes from equity of the sale of a current house or from an inheritance, or you just saved it up or whatever.   I mean, they don't want it to be from drug dealing or whatever illegal means lol.   But basically, the money is the money, so no, they aren't going to generally require that you have a down payment be separate funds from whatever you get leftover when you sell your house.  So if you have say $20k sitting in the bank that you are planning to use as a down payment, go ahead and do that.

Now, if you don't have a downpayment saved up and need that equity to make one, then of course you would need to sell the current home in order to access those funds.  And I know there are home sale deals that have a contingency with regards to the sale of the current home and so on....those are the details I can't answer at all.  

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We paid 5% down for our second home in 2006. We won’t selling our first home because my parents are staying there as it’s more elder friendly than their home. That affected getting a mortgage because we qualify on the loan amount based on having two mortgages to pay concurrently for years. Our first home mortgage was started in 2001 for a 15 year loan, our second home mortgage was for a 30 year loan. For a few years, most of my husband’s paycheck went into mortgages. 

 

Are you thinking of taking a home equity loan or home equity line of credit from your current home to use as downpayment? 

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We are on our third house. With both of the sales we didn't have extra cash in addition to the equity to use as a down payment. I don't remember the details but the mortgage companies worked that out and we never saw the cash from the sale, it just went to the down payment. I think both times when all was said and done we got a check for about $500 of what was leftover from the title company? I really don't remember but it is a commonly done thing so your realtor or lender will be able to walk you through it. 

It's a hassle for sure. But people do it all the time so you'll get through it. (I had to remind myself throughout our moves that people do this all the time and survive. LOL).

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The goal is to have contracts on the new and old house simultaneously. If you find a new house before the old one is sold, you can put a contingency on getting your house under contract. Depending on the market, they may agree (There are other options- wait until you are under contract with the first house or complete the first house transaction and rent in-between....). Then you line up the closings so you sell your first house and then shortly after you close on the second house. It's all a dance and you pretty much hold your breath the whole time hoping that everything happens as planned. Most of the time it does.

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22 minutes ago, Arcadia said:

We paid 5% down for our second home in 2006. We won’t selling our first home because my parents are staying there as it’s more elder friendly than their home. That affected getting a mortgage because we qualify on the loan amount based on having two mortgages to pay concurrently for years. Our first home mortgage was started in 2001 for a 15 year loan, our second home mortgage was for a 30 year loan. For a few years, most of my husband’s paycheck went into mortgages. 

 

Are you thinking of taking a home equity loan or home equity line of credit from your current home to use as downpayment? 

I am not sure.  I want to sell the house we are in now and use the equity we have for the downpayment on the next house.   Do you take out a home equity loan to do that?

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Just now, mommyoffive said:

I am not sure.  I want to sell the house we are in now and use the equity we have for the downpayment on the next house.   Do you take out a home equity loan to do that?

No. You do the transactions concurrently.

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Do you have any local friends who can recommend a reputable local mortgage broker? A broker will be extremely helpful in walking you through all of the options for your particular situation in your specific area. 

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Don't forget that as a seller, you will most likely have to pay realtor's commission, so take that into account. Your "equity" is going to equal the selling price minus closing costs minus commission and you will be able to use that as downpayment - if you time things well.

 

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1 hour ago, mommyoffive said:

Here is the story we still live in our first home.  When we bought we rented an apartment, so we didn't have to figure much out.  So give me all your tips and tricks on how you move to the next house.  We don't have this house paid off, but we have equity.  Do you use that equity for the downpayment and if so how?  Or do you have to have separate money for the downpayment?


We’ve used cash for our down payments, usually 5%. In one case it came from a gift, in another it came from the proceeds of a home sale (we did not sell concurrent with a new purchase), and the last time it came from savings. We don’t have to put down a deposit because DH is VA loan eligible but sometimes the conventional terms are better. We have never had to move ourselves but my mom has, several times, hired movers. We had good luck with local companies (2 guys and a truck), hiring day laborers for cash who really did a nice job protecting her things (sometimes better than our professional movers). Do you have a millionaires club near you? She’s used them too with good results.

ETA: our credit unions don’t require PMI For military/veteran buyers even with conventional loans so that’s never been a consideration for us. It is something to keep in mind tho. We put our first house on the market and just put the proceeds on the bank until we found a new place we wanted to buy.

Edited by Sneezyone

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I’ve known people who have used bridge loans - the way my friends did it was like this: they figured out how much equity from the sale of the current house was going to be used for down payment/closing costs for the new place. Then they got two loans- a mortgage and a bridge loan. When the old house sold, they used the proceeds to pay off the bridge loan.  Usually bridge loans are short term and probably higher interest, though it’s quite possible I’m wrong. 

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Once you speak to a broker, you’ll know more.  Agent/broker, someone.  😊

We planned to use our equity as a down payment, and put a contingent offer on our next home, but in the end we had enough saved for a down payment, and just bought our current home, moved, and sold the other immediately after.  It was a tight market and our current house had four offers on it its first day on the market, so a contingency would have knocked us out of the competition.

Once you get the ball rolling by speaking to someone in your area, it may go faster than you expect.  Be prepared to change things up as needed, and good luck!

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I put my house on the market as we moved out and carried the mortgage for a month until it sold, just because it was a long distance move.

I’ve also had my house for sale concurrent to looking for a new one and that was fine too, i was under contract for both at the same time.  No biggie.

And yes, we calculated what we could afford by pulling out our equity in our current home for the down payment on the next, making sure we had enough to avoid PMI. That was how we budgeted - the amount of home we could afford what what we could pay for with 20% down and monthly payments we could handle.  Bam 😉

Edited by Arctic Mama
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We’re in the planning process, and I hate it, lol.

Real estate is moving relatively quickly here for a change, so I’m hoping to learn that our house is expected to sell quickly (for our area, which can sometimes have listings for a year or longer!) Basically, we have to ask a seller to accept the contingency of having our house sell in order to buy theirs. But, when things are moving quickly, sellers don’t always have a need to accept that!

For us, we’re looking a bit out of the average price range, at houses that have been sitting for a while. So, fingers crossed. As a back up, we’re also considering properties that are a bit lower priced so we can both have a lower down payment and carry both mortgages for a while. Our mortgage guy isn’t overly thrilled with that, though.

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If you can’t afford to carry two mortgages indefinitely, I would not do this with a bridge loan. I also wouldn’t buy without first selling or without a contingency to sell. The economy is bad and getting worse. I would mitigate any financial exposure, especially with large assets. 

We have sold our current house and rolled the proceeds into our next house. Depending on the situation, we either rented in between buying and selling or made our purchase contingent on the sale of the previous house. 

if you aren’t aware of your options, I strongly encourage you to contact a mortgage broker or even your local bank. I wouldn’t enter this situation, in this economy, without strong financial education.  

Edited by 2squared
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33 minutes ago, mommyoffive said:

I am not sure.  I want to sell the house we are in now and use the equity we have for the downpayment on the next house.   Do you take out a home equity loan to do that?

Nope. That would be sell to buy. Mortgage brokers understand that kind of contingency.

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I am trying to figure this out too. I would love to take all the time to find a new house that we love, buy it, move in and then list current house. I think current house would sell in 1-2 months so the overlap should be okay. It definitely will show better without us living here at same time.

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If we were to sell in one year would you throw extra money at your mortgage or just save that money for a possible downpayment?

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33 minutes ago, Sneezyone said:


We’ve used cash for our down payments, usually 5%. In one case it came from a gift, in another it came from the proceeds of a home sale (we did not sell concurrent with a new purchase), and the last time it came from savings. We don’t have to put down a deposit because DH is VA loan eligible but sometimes the conventional terms are better. We have never had to move ourselves but my mom has, several times, hired movers. We had good luck with local companies (2 guys and a truck), hiring day laborers for cash who really did a nice job protecting her things (sometimes better than our professional movers). Do you have a millionaires club near you? She’s used them too with good results.

ETA: our credit unions don’t require PMI For military/veteran buyers even with conventional loans so that’s never been a consideration for us. It is something to keep in mind tho. We put our first house on the market and just put the proceeds on the bank until we found a new place we wanted to buy.

 

When you sold your first house are those proceeds taxed because you didn't immediately buy a house?

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8 minutes ago, mommyoffive said:

 

When you sold your first house are those proceeds taxed because you didn't immediately buy a house?


No. We had up to five years. We purchased again in two or three years. 
https://www.google.com/amp/s/turbotax.intuit.com/tax-tips/home-ownership/tax-aspects-of-home-ownership-selling-a-home/amp/L6tbMe3Dy

Edited by Sneezyone
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1 hour ago, mommyoffive said:

 

Yes.  Sorry if that wasn't clear. 

 

There is something called contingency. You look for a new place, put an offer on it and hope and pray yours will sell in time for all the funds to transition smoothly to where they need to go. It is done all the time so it works out more often than not but I wonder how nerve wracking it is. We always bought from a rental and one time we already lived on the property when we built. We didn't plan it that way (from rental to ownership) but this is how it worked out and I am glad because it seems easier. Get a knowledgeable, motivated realtor who is well connected with a financing person or can recommend someone. Our realtor's friend was the person who did the financing - this made the whole transaction very smooth.

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16 minutes ago, mommyoffive said:

If we were to sell in one year would you throw extra money at your mortgage or just save that money for a possible downpayment?

No. Cash is king, especially in this economy. You will have many out of pocket or unexpected expense related to buying and selling. I would keep cash for those items. 

is your emergency fund fully funded? If not, I would stock cash for your emergency fund. 


if your emergency fund is fully funded, will you have 20% down to avoid PMI? 

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38 minutes ago, mommyoffive said:

If we were to sell in one year would you throw extra money at your mortgage or just save that money for a possible downpayment?

Save the cash. You may have expenses related to selling that will need to be paid before the sale proceeds come through. Or, if you are like me, you will have home repairs on things that break while the house is under contract 😭 Just plan on needing more cash than you think you will.

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Though it's somewhat of a balancing act, we waited for the home we were selling to be under contract then put an offer in on the new home (this kinda stunk at the time because there were homes in the meantime we liked and missed out on but we love the home we are in now so it all worked out for the best) so both were under contract at the same time. We moved all our belongings into storage to get out of the home being sold, packed our vehicles with everything we'd need in the short-term, went to closing for the sold home on a Friday, drove to the new state, stayed two nights with family, then went to closing on the new home. DH then flew back to original state, loaded everything from storage into a U-H*ul, and drove it all to the new home.

It was a balancing act because had something fallen through on either sale....well, I'm just glad it didn't.

 

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If you don’t have 20% down there are still ways to avoid needing to ever pay PMI. You could do an 80-10-10, or and 80-15-5, among other things. Rates are so low right now even the second will be a crazy low rate if your credits good, and you can always refi and roll the two loans into one when you have enough equity.  
 

While you are searching out a broker you can also do things like check your credit, make sure there are no errors or issues,  surprises etc. and pull together paperwork to make things go more smoothly.  That way you will know where you stand credit wise and that allows you to shop for the most competitive rates. Gather your last two years of tax returns, Statement for assets you want to include on your application (you don’t need to include them all- just what you need to qualify for the loan you have in mind), pay stubs, etc. 

And you can also make sure you have things for your current house easily accessible- surveys, property tax Information, HUD statement (or whatever it’s called now I forget)  etc. for the realtor. 

It just goes more smoothly if you have all of this ready in advance and your mortgage broker will love you for it. 

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Look for a good real estate agent. Ask people for recommendations, don’t necessarily go with the person who’s name and face is all over town, either. . We bought and sold in the last year and had a really good agent. He was kind of low-profile , but he was smart and helped us out a lot and taught us a lot.  We also have a good loan officer. This is our third house and we recently refinanced and always use the same gal.

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I will tell you how ours went down. We watched the market for like 2 years...at least.  Found a good deal FSBO.....she was going to let it foreclose after her husband died.....we had our house for sale......a buyer who bailed on us initially came back and said they were ready  to sign.  We signed both contracts on the same weekend...we closed on the one we sold first and he one we bought a week later.  Thankfully the seller let us have possession of new house early because there was work to do.  I don’t think it could have worked out any better and it was pretty stressful. 
 

 

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You make the purchase of your next home contingent on the sale of your current home.

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On 7/5/2020 at 8:27 AM, SereneHome said:

Don't forget that as a seller, you will most likely have to pay realtor's commission, so take that into account. Your "equity" is going to equal the selling price minus closing costs minus commission and you will be able to use that as downpayment - if you time things well.

And don't forget property sales tax and closing costs.  

I can't stand living in a house I am selling, and in our HOT market, there are no "contingency" sales.   I can sell quickly--but I might not find the house I want at the same time.  So we sell, move out, and rent.  Last time was 7 years ago, and we ended up renting for about 9 months.  That's what we will do next time, as well, in part because dh wants to move to a place where I think I will be unhappy and so we will rent for at least a year before we buy, because in the end, that is a LOT cheaper than buying/selling again.  

 

ETA--I got the order wrong above:  we move out to a rental, sell the house, then buy the next one.

 

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Are closing costs just on the house you buy?  Or on the house you sell?

And what are property sales tax?  Is this the same as the normal property taxes I pay every year?  If I pay my 2021 taxes in full in December 2020, is that just a discount or freebie that the buyer gets?

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4 minutes ago, mommyoffive said:

Are closing costs just on the house you buy?  Or on the house you sell?

And what are property sales tax?  Is this the same as the normal property taxes I pay every year?  If I pay my 2021 taxes in full in December 2020, is that just a discount or freebie that the buyer gets?

There are closing costs on both ends. Sometimes the buyer will ask the seller to contribute X amount to close. That part is negotiable. Then you have your set costs from the title company- survey, processing fee, origination fee (if there is one) etc. The title company will give you a good ballpark early on and a final amount within a certain timeframe of closing. 
 

Property taxes will be prorated into those closing costs. So if you’ve paid it all, then the months left on the year will be credited to you as will any homeowners insurance. 

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10 minutes ago, mommyoffive said:

Are closing costs just on the house you buy?  Or on the house you sell?

And what are property sales tax?  Is this the same as the normal property taxes I pay every year?  If I pay my 2021 taxes in full in December 2020, is that just a discount or freebie that the buyer gets?


Paid property taxes are prorated and refunded during the closing. Closing costs on both homes are owed. As a seller, the costs are typically low (buyer-and seller- agent fees) unless you agree to concessions.

Edited by Sneezyone
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If you contact a broker, they should be able to get you a worksheet that is going to line all of this out. They’re going to want to know your taxes, if you have an HOA, your insurance and a few other things and then they can get you a decent work up/ballpark that will answer a lot of your questions and show you what your payments could potentially be with various loan types and/or Down payments. 
 

A decent realtor will also do similar to show you what you stand to clear after generic closing cost if your house sells for X amount of dollars. You can also try to negotiate a lower fee for your listing agent in some cases. That is agent and market dependent. In that perhaps they will take 2% instead of 3%. You can not negotiate what the buyers agent will get. 

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1 hour ago, mommyoffive said:

Are closing costs just on the house you buy?  Or on the house you sell?

And what are property sales tax?  Is this the same as the normal property taxes I pay every year?  If I pay my 2021 taxes in full in December 2020, is that just a discount or freebie that the buyer gets?

I am in California, so I don’t know if things are different state to state,  but when we bought and sold, everything was negotiable. Everything.  It all depends on how badly you wanted to buy or sell. And one thing we learned was.... the sales price of the house was only one piece of the entire puzzle of the transaction. That’s why I was really glad we had an agent. We sold by owner at the night of the real estate bubble in 2003 and that was a cake walk. The buyer would have agreed to everything we asked. But in our most recent purchase, there were a lot of negotiations and it really helps if you have an agent as a go-between.

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We did this 3 years ago and lived in an apartment in between houses. It was more physical work, but we could sell our house, then take our time finding a house we WANTED to buy instead of HAD to buy. We were in the apartment 3ish months and paid extra to get out of the contract, but we knew that might happen, moneywise.

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6 hours ago, EKS said:

You make the purchase of your next home contingent on the sale of your current home.

Yes. This is how it works. You can speak to any real estate agent (you can ask the one that you will use to buy your new house or ask any local mortgage agent) and they will help you understand how this process works.

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We got 2 storage units, packed up over half our stuff and put it in there to stage the house and show it uncluttered.  We thought we were going to sell the house, have to get a temp rental, and then move.   We were all set for that.

BUT, turns out we found a house we liked and our house sold right at the time that allowed us to put an offer on the next house.  Closing on our house was in the morning and closing on the new house was in the early afternoon.   

It worked out perfectly.

But I know it doesn't always work out like that.

When we moved from CA, we rented for 3 months while our house sold, we got the $$, and we learned the lay of the land in NC before buying.  It was a pain, but worth it.

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5 hours ago, carriede said:

We did this 3 years ago and lived in an apartment in between houses. It was more physical work, but we could sell our house, then take our time finding a house we WANTED to buy instead of HAD to buy. We were in the apartment 3ish months and paid extra to get out of the contract, but we knew that might happen, moneywise.

This is what we planned. By chance we have managed to coordinate our moves (despite a four month delay due to Covid) and we are moving directly from one house to the other on 15 July.

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9 hours ago, mathnerd said:

Yes. This is how it works. You can speak to any real estate agent (you can ask the one that you will use to buy your new house or ask any local mortgage agent) and they will help you understand how this process works.

Many many sellers will not accept a contingency offer.  I wouldn’t.

It really does take some planning to sell one house and buy another. Selling and then renting is the safest,  but more costly.  Someone mentioned renting for 7 months......seems like most rentals have at least a 6 month lease, more likely a year.  She mentioned they paid to get out of the lease.  So basically this renting option has to be calculated into the cost of moving. 
 

if you know the market  and have a really good idea where you want to live and what is a good  price, you put your house up for sale and be ready to act quickly.  If you get an offer, before you respond see what is available for sale and respond accordingly.  For instance if the offer is ‘meh’ you might accept it if your dream house is available.  If the offer is full or above Asking price you might accept it and if you can’t find something immediately that you want go the rental route.  
 

We had a house in mind to buy when our old house was for sale.  Someone offered us 15k under asking....,instead of being offended we called the seller of the house we wanted and asked her if she would take $15k less and she said yes.  
 

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Random ordered thoughts . . . Sooooo many nuances to this decision. Usually, owning two houses at the same time isn't an option financially for most folks. So, you've gotta sell first, then buy. 

+ Don't pay extra on your current mortgage right now. Save the cash. That's a no brainer. 

+ You should sit down with a knowledgable realtor for an hour. That would answer most of your questions much better than I can.

+ Answers depend a lot on market conditions. In some towns, it may be that things are so "hot" that no seller is going to accept an offer with a contingency to sell your current home. You may have to be able to make an offer w/o that contingency, which means you'd need to be pretty flush. If you're not that flush, then the only option is to sell first, THEN buy, meaning you might need to stay in a rental or crash in your parents' basement or whatever for a few months between homes.

+ Answers depend a LOT on your financial situation. If you can qualify for a good mortgage on purchasing another home while you still own this one, then that's an option. (I.e., your household income is enough to cover both mortgages at 25% total or less of your gross monthly income. And TOTAL debt payments on ALL debts are under about 35% of gross monthly income.) Talk to a mortgage banker (or three) to find out your best options based on your finances. If you easily qualify for best terms while owning the current house, then that opens up a lot of options. 

+ Another financial issue. Do you have cash on hand (or easily accessed) to put 20% down on the new place before selling/cashing out of the current one? If not, then you probably need to sell first. 

+ Could you comfortably leave your "old" house vacant for 6-12 months, still maintain it, and cover the bills? If so, that opens up the option of moving out to your new home. If you can't comfortably do that, then you should likely go ahead and sell "old house" before committing to a "new house." This means you likely need to be comfortable putting your stuff in storage for 6 months and getting a short term rental between homes. 

+ Answers depend on if you are staying in the same area or are moving away. If moving to a new area, I'd advise selling your current house, then moving to a rental for 1 year. During that year, you can get to know the area and nail down your new home to purchase. It's worth the extra expenses and hassles of a temporary rental because you get a lot of benefit of the time to get to know the area before committing to a house purchase.

 

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2 minutes ago, StephanieZ said:

Random ordered thoughts . . . Sooooo many nuances to this decision. Usually, owning two houses at the same time isn't an option financially for most folks. So, you've gotta sell first, then buy. 

+ Don't pay extra on your current mortgage right now. Save the cash. That's a no brainer. 

+ You should sit down with a knowledgable realtor for an hour. That would answer most of your questions much better than I can.

+ Answers depend a lot on market conditions. In some towns, it may be that things are so "hot" that no seller is going to accept an offer with a contingency to sell your current home. You may have to be able to make an offer w/o that contingency, which means you'd need to be pretty flush. If you're not that flush, then the only option is to sell first, THEN buy, meaning you might need to stay in a rental or crash in your parents' basement or whatever for a few months between homes.

+ Answers depend a LOT on your financial situation. If you can qualify for a good mortgage on purchasing another home while you still own this one, then that's an option. (I.e., your household income is enough to cover both mortgages at 25% total or less of your gross monthly income. And TOTAL debt payments on ALL debts are under about 35% of gross monthly income.) Talk to a mortgage banker (or three) to find out your best options based on your finances. If you easily qualify for best terms while owning the current house, then that opens up a lot of options. 

+ Another financial issue. Do you have cash on hand (or easily accessed) to put 20% down on the new place before selling/cashing out of the current one? If not, then you probably need to sell first. 

+ Could you comfortably leave your "old" house vacant for 6-12 months, still maintain it, and cover the bills? If so, that opens up the option of moving out to your new home. If you can't comfortably do that, then you should likely go ahead and sell "old house" before committing to a "new house." This means you likely need to be comfortable putting your stuff in storage for 6 months and getting a short term rental between homes. 

+ Answers depend on if you are staying in the same area or are moving away. If moving to a new area, I'd advise selling your current house, then moving to a rental for 1 year. During that year, you can get to know the area and nail down your new home to purchase. It's worth the extra expenses and hassles of a temporary rental because you get a lot of benefit of the time to get to know the area before committing to a house purchase.

 

This is a really good post.  Thanks for summing things up so well. 

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2 hours ago, Scarlett said:

Many many sellers will not accept a contingency offer.  I wouldn’t.


 

Same here. Too much risk. 

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Well, what can sometimes happen is you put your house up for sale and it sells quickly and then you scramble to find something so you don't get stuck having to do an intermediate move to a a rental. And when you scramble to avoid being "homeless" after your first house sells you end up with something that really is not what you wanted because you rushed. Then you are stuck in a house that doesn't really work because you rushed so you didn't have to move twice. I would love to say I learned from this mistake once but I bet given the same situation I'd be anxious to find something to avoid the short term rental again. I so hate the idea of moving twice. This issue can be mitigated if you have someplace to crash for a couple weeks or a month but we never had family that could put us up like that. 

So, in our experience we were able to shop for the new house with a contract for sale in hand (though then the contingency is on the sale going through).My advice would be to have a contingency plan for yourselves to go somewhere if you need a month or two between the sales rather than rush into the wrong house. It's a huge pain but better than being locked into the wrong house for years. 

Also, depending on the condition of the house it might not show better empty. When we sold our last house (the one we did the bulk of raising three boys in) we were showing it while we were living there and we decluttered alot but all the main furniture and area rugs were still in the house. When the movers left with the last of our stuff and we swept up I looked around and said "man this house looks like crap." The scuffs on the walls and doors and every imperfection (and there were many) were on full display. It really looked so much worse empty. 

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