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Buying A New Home While Selling Your Old Home

By
Real Estate Agent with RealEstateSINY.com

Buying and selling a home at the same time can be frustrating. In a perfect world your Realtor together with your attorney would coordinate both closing on the same day, such as: the sale of your home in the morning and the purchase of your new home in the afternoon. In today's world it is rarely possible.

What should you do when buying a new home while selling your old home? here are some ideas for you to consider:

1- If you sell your home first - many homeowners don't want to sell first because of the fear of becoming homeless, but this idea could be a better way then buying a new home first. Consider renting the house back from the new owners provided you'll cover their costs like mortgage payments, insurance, taxes and utilities.

2- Consider moving in with family,short-term rental or a hotel. No one is happily looking to carry two mortgages and qualifying for an additional second mortgage can be a challenge.

Lenders are somewhat sympathetic to homeowners in this situation and often loosen up their traditional standards a bit. While a typical mortgage carries a 40% debt-to-income ratio, a lender may allow a 50% to 55% debt-to-income ratio for someone temporarily straddling two mortgages. Keep in mind, that lenders are more cautious today.

Before a lender approves you for a second mortgages. Provided you can qualify, here are ways to help you come up with the down payment on the new home before you have the proceeds from the old one.

1. Tap your home equity The cheapest way to come up with a down payment is to borrow equity from your home, assuming there is enough equity there. Once you sell the home you simply pay off the loan.

2 . Borrow from your 401(k) If you need only a little bit of money for a down payment, you could borrow from your 401(k). Most employers allow workers to borrow either 50% of their vested balance or $50,000, whichever is less. You then have the next five to 10 years, depending on your company's rules, to repay the loan plus interest (which you pay into your account), which typically runs one to two percentage points above the prime rate.

Be warned: If you leave your job for any reason, you'll have to return the money immediately or pay the taxes and a 10% penalty.

Please consider these ideas when buying a new home while selling your old home.

Posted by

On Your Team.

Irena Popilevsky

NYS Licensed Real Estate Broker/Owner

RealEstateSINY.com

(917) 579-4455

www.irenapopilevsky.com

Comments (2)

Carlos B
TreeHouseForRent.Com - Exeter, CA

On a larger scale, I was involved in a 33 acre subdivision back in September of 1990. Although it was over 70% complete, no-one could buy the lots because they couldn't sell their existing homes. History has a way of repeating itself. Thanks for the post!

Jan 25, 2010 12:22 PM
Kenneth Cole
Weichert Realtors Appleseed Group, 2043 Richmond Ave. S.I.N.Y. 10314. office phone 718-698-9797, Appleseedhomes.com... - Staten Island, NY
NYS Licensed Real Estate Salesperson

I'm saving my 401K for my old age.  Which will be in about 10 years. Meanwhile, I'll still act like a kid.

Jan 27, 2010 12:36 PM