Can You Buy Before Selling Your Home?

can you buy before selling your homeA lot of people want to buy a new home in today’s market to take advantage of these crazy low prices and interest rates.  The problem is selling the home they already own.  For some, this totally blocks them because they can’t afford to buy a new home without selling, but some owners believe they can afford to buy that new place… the problem is getting a mortgage!  Loans in Charlotte might hold the key to making your dream home a reality.

Fannie Mae’s rules are always changing but right now the rules do allow you to buy a home before you sell the one you own, with some conditions.  If you are trying to sell your current home and it is listed for sale on the MLS, you will have to qualify as if you will be paying both mortgage payments permanently and you must have cash reserves to cover both payments for up to 6 months.  If the home you are selling is under contract and all financing contingencies have been removed, Fannie Mae says you no longer have to count the current house payment against your Debt to Income Ratio, but not all lenders will allow this so make sure you ask up front.

Some homeowners plan to rent out their current home, thinking that the rent will cover the monthly payment and they can go buy that new dream home… NOT SO FAST!  You got it… there are rules for that too! 

If you want to use the rent to cover the mortgage payment, Fannie Mae requires that you prove you have a minimum of 30% equity in the current home!  That was tough enough a few years ago but in this market where prices have dropped, most homeowners do not have 30% equity in their homes.  In order to prove you do have 30% equity an appraisal must be done… so that’s $450 to find out and no guarantees!  You also will have to provide a fully executed lease agreement and evidence receipt of the security deposit into your bank account.  After all of that, you can still only use 75% of the monthly rent to offset the mortgage payment!

FHA rules are very similar but instead of 30% equity you only have to prove 25%.  Another nice feature of FHA is that it does allow you to use the rent to offset the payment if you are being relocated by your employer to a location not within a reasonable commuting distance.

If you are thinking about buying a new home before or without selling the home you already own, give me a call and I will help you figure out exactly what your options are today!

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