Selling House- New Mortgage
So we are selling our house Memorial Day in the Chicago suburbs and moving to Kansas City. With the proceeds from our house sale we will have enough money to pay off our current mortgage (3.75% 30 year conventional loan) and have more than enough for a 20% downpayment on a new house (we have excellent credit). We will be staying with family in KC until we can find a new house. I have a couple of questions on the process:
1. I'm assuming we pay off our current loan and apply for a new loan since our current interest rate in pretty high. I think we will be looking at a conventional 20 year for our new loan.
2. We aren't sure how quickly we will find a new house in KC (could be days, could be 6+ months). Should we apply for a new loan right away? I know in this hot market we have to be prepared to move fast and any buyer is going to want us to be pre-approved, but I also know pre-approval only last so long.
3. What are the tax ramifications on the money we have for a downpayment (under $200k) if we don't buy right away?
Thanks in advance!
Hi Mike S., great name and last name initial haha. You can apply for a new loan right now and the lender can tell you if it’s contingent upon the sale of your current house or not. If this is your primary residence and you’ve lived in it for at least 2 of the last 5 years, you would be exempt from the taxes. If it’s an investment property, it’s a different story.
Thanks! It's our primary residence and we have been here for over 10 years.
1. title company should be paying that off.
2. pre approval - can be done in a day and doesn't cost
3. Speak to your cpa. General rule is if you lived in primary residence for 2 of last five years 250k is tax free for individual and 500 for married.
Hope this helps..
1. The loan must be paid off at closing for the title to transfer to new owners. The title company handles pay off, so you don't have to do anything.
2. Yes get pre-approval and have them give you a letter showing pre-approval amount. This will help you shop for houses in your approved price range and you can provide the letter with your offer.
3. Primary residence, more than 2 of 5 years lived there and gain below limits, so the gains are not taxable. There is no time limit or requirement to put the cash into a new home. Just put it in your bank account and use as you like.
@Mike S. your realtor and your attorney should be able to go over all the functional parts of the process of selling here in Chicago in detail. Normally I do this in my initial listing presentation. I also think it makes sense for you to have the attorney run a net proceeds sheet through the title company early on which will show the mortgage pay off and will answer a lot of the other questions you have. Again, I do all of this before we even go to market with my sellers as it clears up so many questions.
When it comes to buying in the new market, lean on your team there. Your agent and lender can guide you in the process and if they are intimately familiar with the market then they will know how best to help you accomplish your goals.
@Mike S. - I was going to go exactly where @Michael J Scanlon went....you don't have to pay capital gains which is awesome (assuming you have them after being there for 10 years). And really there is nothing you have to do except document it on your taxes.
I'd just recommend finding a lender in Kanas City and getting pre-approved again so you are ready to pull the trigger when you find the right one.