Growing Pains Got You Aching for a Bigger Home?

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Growing Pains Got You Aching for a Bigger Home?

Are you an Orange County home owner ready for a bigger home? 

There’s never been a better time to take advantage of cheap home loans and low home prices – a perfect combo for Orange County home buyers  – if you’ve got the right strategy.  Here are two ways in today’s real estate market to make a move up work out and how to pick the right strategy for you.

Sell Your Current Home

1. You will make enough money from the sale of your current home to cover the costs of buying the bigger home.  Regardless of what you paid for your house, if you will make enough money to get into a the bigger house you have in mind OR is you have enough cash laying around, this is a great option.  So here’s what you do.  Get your house ready to sell, list your house for sale at a price that will bring in offers, get it in escrow, then make an offer to buy the bigger house contingent on yours closing.  Easy Peasy Lemon Squeezie.  The sequence here is REALLY important and bears repeating – List, get offers, open escrow, THEN make an offer to buy the bigger home.  When yours is as good as sold.  And the seller of the bigger house has the assurance that you’ll have the money to buy their home.  This is not a good market for making offers when your house is not even for sale yet.  Very very very few sellers today will even consider a contingent offer on a home that is not AT LEAST in escrow.  And most sellers today will ask for proof that your buyers’ contingencies have been removed and the close is a reasonably sure thing.

Keep Your Current Home and Buy a Second Home

2. You have cash on hand to cover the costs of buying the bigger home WITHOUT having to sell your current home.   Bottom line here is that you want to keep your current home AND buy a bigger home.  Hang on tight, this is going to get a little tricky…..

If you can get pre-approved to buy the big new home and keep your current home – you’re good to go.  This means you have the money in the bank and the monthly cash flow to make an lender comfortable that you can pay two mortgages.  Buy the new one and then sell the old one when you can get it all ready to sell for the most money possible.

Otherwise, you are probably going to need to rent your current home in order to qualify for a loan to buy the bigger home.  How come, you may ask?  For at least three reasons – a. you want the bigger home to qualify as your primary residence (lowest interest rate) and b. you can’t afford to pay two mortgages, and c. you don’t want your current house to just sit there empty.  So, you need to get your current house rented and you need to qualify for a loan to buy the bigger house.  Remember how important sequence was in option 1?  It’s even more important in option 2.  Read on…

Before you even think of keeping your current home as an option, you must know that lending guidelines are currently very tight when it comes to documenting the rental of your existing home when you are purchasing another home.  There’s a requirement, from most lenders, that you have at least 30% equity in your home.  And they will ask you to pay for an appraisal to PROVE the equity is there.  So if and only if, you think you have 30% equity in your home (as in, what you owe is 70% or less than what the home is currently worth) here’s the sequence for success:  Get your house ready to rent, list your house for rent at a price that will bring in applications to rent, select  a qualifed tenant and sign a legitimate lease, get the deposit check and the first month’s rent check, then make non-contingent offers with a bonafide pre-approval letter on the bigger house. 

Piece of cake, right?  Well, not really.  But with a lot of hard work and a dedicated Realtor, you’ve got at least a fighting chance!

Give me a call and we can talk through which scenario will work best for you!  I’m Leslie, just keeping it real in Orange County real estate.  949-678-3373

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