Rules for Buying a Primary Residence WITHOUT Selling Current Home!

Remember there is up to a $6500 tax credit for move buyers!  Must be in contract by 4/30/10 and close by 6/30/10.

Scenario 1:  Home on the market and purchasing a new primary residence

• Current home does not sell before the close of the new home than:
  • Borrower qualifies on new home with current and new home monthly payments
    • includes principle, interest, property taxes, and hazard insurance
  • Reserves at closing on the new purchase will be required (bank specific)
    • as a rule use 6 months of principal and interest payments (PITI) to cover both homes
    • possibly reduced 2 months (PITI) depending on the loan to value on the new purchase
• Current home is sold BUT not closed before purchase  of new primary residence
  • Each lender maybe different MAKE SURE to check.  HOWEVER....
  • What could be required so both payments are not used to qualify for the new home is:
    • Present:  Non-contingent sales contract for sold home
    • Present:  Lender's valid loan approval for new buyer for sold home
    • Reserves of a certain number of months required to cover both homes
    • Sold to a relocation company
      • Copy of the executed buyout agreement
      • reserves for both homes may not be required

Scenario 2:  Converting Primary Home into Second Home; purchasing new Primary

• Each lender is different but they will require a certain number of months reserves in the bank at closing to cover both homes; principle and interest payments
  • this will again depended on lender as well as loan to value
• Distance between the homes will be taken into consideration to determine if truly a 2nd home
• Write a letter of explaination of what this will be your 2nd home and why purchasing the new primary

Scenario 3:  Converting Primary Residence to Investment and purchasing new Primary

• Qualifying with rental payments on home being converted to investment
  • Borrower must have 30% equity in the existing home (25% equity if new home purchase is an FHA loan)
    • value is determined by an exterior appraisal dated not more than 60 days from date of closing on new home
  • Reserves at closing for a certain number of months (bank specific) will be required to cover PITI (principal/interest payments) for both homes at closing
  • Fully executed lease agreement for tenant
  • Proof of receipt and deposit of security deposit
• Do not have 30% equity in current home.
  • Borrower will have to qualify with both payments current home and new home
  • Reserves will be required

Letter of explanation will probably be required by the lender of why you are selling/keeping your current home and buying a new one.

Only certain borrowers will qualify however if they do this is the perfect time to consider.  Move up tax credit, low interest rates still, and low home values!

Jump on the Wagon!