With interest rates dropping to their lowest levels since 2004, the home equity loan re-finance bug is itching a lot of folks again. As we approach the Spring Market which traditionally swings into full gear around March, home buyers will be able to take advantage of low interest rates and a large inventory selection of homes to buy as well.
If you currently own a home and intend to sell it, it's important to coordinate your transactions properly so you do not find yourself making two mortgage payments. Failing to sell one home before purchasing is a tremendous source of financial hardship to many home owners. There are some steps which you can take to help you to avoid being trapped by your Trade-Up Home.
1. Know Your Values?
Many home owners make the mistake of relying on old data to determine the equity that they have in their home. In today's market with the shifting sands of changing value, an appraisal which is older than 60-90 days is probably NOT an accurate indicator of the current value for homes in your neighborhood. The average home Sale in Grand Rapids, Michigan has decreased almost 26% since the end of last year from $121,000 to just under $100,000 today.
2. Steer Clear of the Loan Guessing Game!
It is vitally important to get pre-approved for a new loan. Credit lending standards have tightened considerably within the last 3 months due to the sub-prime lending crisis. But with the New $8,000 Buyer's Credit AND the fact that interest rates are trending downwards below 5%, there's plenty of incentive to get a professional review of what you can afford.
Don't assume that because you qualified for a mortgage last year, the same terms and conditions still apply. To avoid an unfortunate surprise, get an updated, valid pre-approval letter from your lender which includes: verification of your credit, mortgage or rent payment history and verification of your employment.
If you own a home you intend to sell, verify the balance and pay-offs for your current loan. This will give you an accurate indication of how much money you may be able to spend towards the purchase of your new home.
3. Sell First!
If you own a home and don't want to be strapped down with supporting two mortgage payments...Sell Your Home First and then buy your new home. With the incredible array of properties for sale, the idea that your dream home will vanish if you don't act now is probably not as big a problem as holding onto your old home for a year while making monthly payments will be.
This is NOT the time to get into the Bridge Loan Trap just because interest rates are great. Although the spring market has definitely picked up, you don't want to create a bad deal for yourself while trying to get a good one!
4. Don't Leave Cash on the Table!
If you're buying another home, most home owners want to get as much as possible out of the home they are selling. This is normal and has a certain logic to it. However, taken to extremes, many home owners have inadvertently hurt themselves by holding on far too long to a declining asset. If you're moving to a more expensive home, negotiate hard to get concessions on your new home purchase.
A 10% concession on a $200,000 home will more than make up for a 5% loss on a $100,000 home. When you factor in the additional 3 ~5 months of mortgage payments which you may be making while you wait for a buyer rather than pricing your home to Sell...well, it can run up to be quite a loss.
5. Spiff, Clean & Repair!
In a market with a lot of competition, your home must look it's best if you intend to sell it at the best price the market can support. Home buyers are looking for value and the first indicator of value is curb appeal and general appearance. Here's a link to a Staging article which provides some tips about staging your home for sale.
6. When You're Ready to Look...
When you're seriously ready to start looking, you might want to consider a Brand New Model rather than a Re-Sale. You can get a lot for your money right now. I've created a search for a variety of of areas in Grand Rapids and the surrounding communities in which BRAND NEW HOMES start at around $100,000! NO KIDDING!
7. Coordinate Your Exit Strategy...
There are few things more stressful than closing on your home and having nowhere to stay. If you are buying a new home, sometimes there can be delays in obtaining permits or in completing the building process.
Even a home which is not new can present unforeseen challenges with move out dates. It is best to give yourself a little overlap time if you need to coordinate a move to a new home or currently occupied home. A good real estate agent will factor this into your contract negotiations.
Don't allow the purchase of your Brand New Trade Up Model to become a nightmare. At Audu Real Estate, we strive to coordinate the home purchasing and home closing process for a smooth stream-lined transaction. If you would like to learn more about our services, please visit our website.
*this blog post was originally published in the Spring of 2008 and has been updated to reflect current market realities. Questions about the myriad of possibilities which may be open to you can be directed to the author @ firstname.lastname@example.org
Copyright 2008 Audu Real Estate All Rights Reserved