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found my dream home--best way to finance?

Posted by fallingwaters (My Page) on
Thu, Apr 5, 12 at 22:16

my home is not even listed yet and won't be for maybe three more weeks.
but i've found our next home and should jump on it i think.
i owe just over fifty per cent of my home's value and another home in the village outright.
i'd like to mortgage the village house for the down payment and finance the rest to buy the new house.
my current home wil have to be rented, which is scary but doable.
when my current home sells i will pay off the new home mortgage almost entirely, plus the loan i took out on the village home.
is this the only way and/or the right way to go or not?

the home is fsbo and i believe it ahs been on the amrket for a while, hope there is a little wiggle room there.

Follow-Up Postings:

RE: found my dream home--best way to finance?

Good luck. Most lenders have clamped down on this type of thing. You'll need to be able to afford the 3 mortgages outright and they likely aren't going to count potential rental income in those calculations. Definitely get in to see a mortgage broker before you go any further down this road.

RE: found my dream home--best way to finance?

"...they likely aren't going to count potential rental income in those calculations. "

Unless you have a signed contract and a long term history of keeping the place occupied.

You can also run into questions about tax detectability of the mortgage on an investment vs. your principle residence.

The days of 'creative financing' are pretty much over.

RE: found my dream home--best way to finance?

Why would you rent your current home if you're trying to sell it? It would be hard to find a renter if they know you could sell it out from under them at any time. And they wouldn't be motivated to keep the house in show condition to increase your likelihood of selling it.

If you're thinking of renting your current home because that's the only way you could afford the mortgage on the new home, then you're stretching yourself too thin. You need to just sell your current home first (or the one in the village), then shop for a new one.

RE: found my dream home--best way to finance?

Talk to a good mortgage broker. All of this really depends on your total income (including the rental) versus total debt ratio and what that looks like. We recently purchased a rental property with the down payment coming from the HELOC on another rental property. No problems what so ever. Our rentals show good income. Everything is based on your taxable income, ie 1040. After all is said and done, this new rental makes money after paying both mortgages and all expenses with zero cash down from our savings.

One problem is that you are not allowed to move money from the rental to the primary residence easily. You need to talk to your tax folks regarding that. The money should be kept relatively separately for tax purposes.

RE: found my dream home--best way to finance?

originally we were thinking of holding onto our primary residence and keeping it as a rental, as it sits in a vacation spot.
however i feel more comfortable simply selling altogether and buying the new home.
if i have to finance it i will, and when my home sells i'll be able to pay the new home right off.
much less complicated that way.

RE: found my dream home--best way to finance?

You will have to sell one home or the other first in order to be able to purchase this new home. I'd hurry and get your current home on the market. Ask for some feedback from the realtor that wanted the short term contract for his buyers and get some help here staging. Above all, since you have already found the home you want, price the home aggressively for the market. Have your realtor run the CMA's and price the home at 95% of the sold comps. Be willing to take 85-90% of the market value in order to be able to sell quickly and jump on this other house. It's the only way you'll manage to snag it.

RE: found my dream home--best way to finance?

You may use/anticipate rental income ONLY if you have proven yourself as a landlord for at least a year. They will not grant you the income towards mortgage qualification without that history/experience.

RE: found my dream home--best way to finance?

Last time we moved, we had one home listed for sale when we purchased the new one (not newly built, just new to us). Anyways, as long as we put 20% down and kept the purchase price below $Xk, then we could buy.

That was due to our income & job history & total debt load (we didn't have any debts outside of the existing house - college and cars were all paid off).

So it MAY be possible, you need to talk with a mortgage professional to find out.

RE: found my dream home--best way to finance?

2 years ago I owned 2 houses in the Pacific Northwest. I was relocating to New England and need to buy before I sold either west coast property in order to make it easier on my parents, who live with us. I had owned the Oregon property for 25 years, and the Vancouver WA property for 18 months. I had a line of equity on my Oregon home which I had never used. I took enough on that to buy the New England property for cash. When the OR property sold 3 months later I paid off the equity line. The Vancouver home had sold in 2 months. It was easy peasy and nobody asked me any questions!! So I basically owned 3 houses for 3 months and then all the dust settled.

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