Buying a new home when you already own a home...

4 Replies

My husband and I still live in the first house we ever bought (6 years ago), so we haven't experienced the "move up" house-buying scenario yet (buying a bigger/better house to raise a family), but I'm looking to the future and want to know what our options are.

Assume, for the sake of argument, that you can't qualify for both mortgages simultaneously.  How do you qualify for a loan, and what are the requirements related to selling your current home?  Does it make a difference if you're buying in the same area versus another state far away?

I'm just trying to understand the process and requirements.  Thanks in advance!

i think you can get a bridge loan or something like that. also, they can accept your offer on a house contingent on you selling your house.

talk to a mortgage person. this used to be very common in the past when people could not afford both mortgages at the same time..

btw, i tell my friends and family that "moving up" is a sure way of "staying poor". i do not know your current situation, so maybe i should not comment. but i still live in our 1k sq. ft house. and have 13 rentals. i tell my wife "there's no point of moving since we can just get another house with the money that we would spend on a bigger house".

Thanks George, yes, I figured I'd have to talk to a lender to see what our specific options are.  I was just wondering how it typically works when others have done it.

Regarding moving up, we're actually anticipating moving to another state in the future, so that's why I was wondering how this works.  Considering that we'll be moving from Orange County CA, we'll be able to buy a better house (with better local schools) for the same price that we sell our current 1200 sq ft dingbat house here for!

Kimberly,

If you're moving out of state and your job will be out of state as well the UW in that situation will consider this an Owner Occupied residence.  This will allow you the chance to have the best rate and terms possible.  If you're selling your home and using income from the sale as down payment that is also an easy task.  At least the theory of it :)

If you're keeping your home for rental purposes set it up so that you have a rent lined up before you are in contract on your new home. This will give you more income because if the departing residence has at 30% equity ( conventional ) or 25% equity ( FHA ) you can use that rental income towards your income.

If you keep it as a second home then you would need to qualify for both mortgages. Second homes tend to be for vacation so your home would need to be in vacation area like the beach, lakes, maybe a lot of shopping.  This isn't something set in stone but it's nice to paint a clear picture for an UW because they tend to look at things black and white with no gray area typically. 

I hope this helps :)

@Kimberly T.  

 @Shaun Weekes  

is correct.  Especially the in theory part. You can get the approval no problem.  The lender will be best suited by getting a net sheet from your escrow company to show the potential gains from the sale minus all closing costs.  However, this will mean you are a contingent offer.  So your offer is far less attractive then a non contingent offer.  This does not mean you will not be able to get your offer accepted, it will just be that much harder. 

Contingent= unless this happens this cannot happen. 

The best solution if to put your home on the market and make your sale contingent on a replacement property.  So you can get in contract and tell your buyer I have X days to find a replacement property before I remove my contingency, and we are in a binding contract to sell.  Another solution is to sell your home and ask for a rent back on your property.  Escrow will not allow a contract for rent back to exceed 29 days.  A longer rent back it will have to be agreed upon outside the sales transaction between you and the buyer(who will be the new landlord for a limited time) 

As you can see all scenarios involve extra steps, and these will add to the already complex process of a sales transaction.  Our OC market has slowed significantly, ( In regards to market time and appreciation) because the investors have left for the most part and more sales are contingent.  So in theory getting the approval is fairly simple, but the actually process is fairly complex.  Feel free to reach out if you would like a more in depth description of a sample situation for you. 

Also, in regards to a vacation home anywhere qualifies for a vacation home.  The determinant is that there must be a primary residence and it has to be a logical distance away form the secondary residence to qualify as a second home.  The large issue here is qualifying for both mortgages.   

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