Ready to buy a home, but can't sell?

REAL ESTATE Q & A

Q.  How can I take advantage of today's great interest rates and home prices, when I can't sell my current home?

A.  If your housing needs have changed, welcome to the club. That's a perfectly normal situation that has motivated home sellers and buyers for decades.

In today's market, however, it's not always easy (or even possible) to sell one residence and use the equity to purchase another. That doesn't necessarily mean you're trapped forever in a home that no longer fits your shrinking or growing household... not if you can rent that home for enough to cover your monthly mortgage payment. 

Have you considered these other options for your down payment and closing costs?

• VA Financing - Little or no money down for qualified veterans, as well as active duty military.  Even if you've already used your VA eligibility in the past, you may be able to use it now.  My husband and I have used VA several times for refinancing and purchasing.
• FHA Financing - Only 3.5% down for qualified buyers, within the local loan limit.  This is very popular in today's market.
• Closing Help - FHA and VA allow sellers to pay up to six percent towards "actual costs" of the loan.  Some Conventional loans allow sellers to pay up to three percent of the borrower's closing costs.  With so many homes on the market, many sellers are willing to do this.
  
• Retirement Plan - In some cases, you may be able to borrow your own money previously contributed to a retirement plan.  Check with your plan administrator to find out if this is possible and to determine any penalties or tax obligations that accompany this action.  One of my clients is using this resource to close on his first home in January, and the seller is paying most of his closing costs.
  
• Life Insurance - You may be able to liquidate the cash value of your life insurance.  Check with your insurer to find out if this is an option for you.
• Refinance your current home - Even if you can't sell your current home in today's market, you may be able to liquidate some of your equity for down payment and closing on another home by refinancing.  For some homeowners, refinancing will lower the payment to improve cash flow, even if you don't take cash out.  A lower mortgage payment could increase your cash flow if you convert your current home to a rental property.
• Relatives - Even if you can't refinance your current home or use your retirement plan or life insurance for down payment and closing, your parents or another relative may be in a position to do so.  It doesn't hurt to ask. 
  
• Owner Financing - The sellers of some homes on the market may be willing to hold a second trust for all or part of your down payment/closing costs.  My mother recently reminded me that she and my dad sold their home with owner financing during a previous real estate meltdown. 
  

Don't assume you can't get a Conventional loan with minimal down payment.  95% loans are making a comeback in the marketplace, and some well-qualified buyers are taking advantage of them to avoid the high FHA insurance.

If your housing needs have changed, you aren't necessarily trapped in your current home by today's struggling real estate market.  This may be perfect timing for you to make a move.

Copyright 2006-11.  All rights reserved.

DISCLAIMER: Information contained in this post is deemed reliable on the date of publication, but it is not guaranteed and it is subject to change without notice.
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Not certain this is the right time to buy or sell a home? I've helped thousands of Maryland home buyers and sellers, and I'd be glad to share my experience with you. No cost or obligation to you.

Margaret Woda, REALTOR and Associate Broker
Long & Foster Real Estate, Inc.   (410) 721-1500 Office
Direct:  (301)346-2923 or EMAIL

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