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Buying a second home before sale of first…?
Question by carrie p: Buying a second home before sale of first…?
I have found a perfect home within ten minutes of where my husband and I work. Our current home is an old Victorian fixer upper about 45 minutes away. I know that within six months time we would be finished fixing it up to where we can recoup our mortgage amount. But our market is very slow, close to six months for homes to sell. Unfortunately, the property we want is going to move quickly. The home we want needs cosmetic touches only and is priced about ,000 below market. Our incomes are above average for this area in the midwest and the monthly mortgage of the homes together are well below 30% of our income. Should we purchase the second home? Can we work with the seller on setting a longer time frame on the purchase agreement, for example 120 days or longer? Do I have options or do I just need to dream about owning the other home?
Best answer:
Answer by mfr354
most sellers won’t go over 45 days. In today’s market the banks are real hard on second home buyers.
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Published in: Victorian Articles and QA
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new rules have recently been established regarding this.
If you have 70% equity in your current home they will allow you to keep it as a 2nd home but you will have to qualify with both mortgage payments.
The only way you can qualify with just your new home payment is if you are relocating due to work and can prove it, then they will let you use 75% of the rental income you would get from your current home to help you qualify for the new home.
People were doing what is called “buy and bail” where they got a cheaper house saying they were goint to rent out their previous house but then they just stopped making payments and let the old expensive house foreclose once they got thier new house. Because of that they are looking very closely at making sure you can make both payments if you buy a new home and still owe one.
You may be able to extend the time frame on moving into the new home. Is it still occupied? If it is, you’ll have a better chance of extending it… if the current owners have already moved out, they’ll probably be less likely to want to wait. If you are sure the new home is a great deal and you and your family love it, and you can afford 2 mortgages and the closing costs, you should do whatever you and your husband thinks is best. You should plan for your home to be on the market for at least several months after it is fixed up due to the current state of the real estate market. Plus the 6 months you need to fix it up. Another option (if you purchase the new home) is to rent out your current home (assuming it is in good enough shape, which since you live there now I think it is) and when the lease is up, reassess the market. If it is good, fix it up and sell. If it is not, keep it as a rental until it is paid off more. In today’s market, it’s not always smart to fix up homes now because you are unlikely to recoup your construction costs right away.
Good luck!!
Usually that is a very bad idea. However in your case since you can afford to pay for both homes at the same time by all means go for it. Just be very, very sure that what your saying is true and not just wishful thinking. How about the down payment?
You probably will not be able to work with the seller. They want their property sold and quickly and will not be accommodating your wishes.
Make an offer to purchase the 2nd home contingent on the sale of your first home.
If the seller doesn’t go for this, you can ask the seller to rent you the home with the option to buy it. So, you could move into the second home and be renting it while still making mortgage payments on the first home. Once you sell the first home, buy the 2nd home.