Save up 20% to move to a new house?

[Jumpem]

It seems that most people I have talked to suggest not attempting to make an offer with a contingency to sell your current house. Instead they suggest buying the new house, and then selling your original one.

So my question is, do people save another 20% down for their next house? If you pay extra towards your first house in the meantime none of that equity will do you any good in this scenario, correct?

 

[olds]

1. Unless you are rich, sounds risky. Can you afford two house payments (for who knows how long) and to fix the stuff in your old house that the potential buyer finds?

2a. You need 20% down to avoid paying PMI.

2b. Equity is always good, it's money in your pocket. If you are planning to sell soon and prices are falling, it could be a waste in that case.

 

[Jumpem]

1. Unless you are rich, sounds risky. Can you afford two house payments (for who knows how long) and to fix the stuff in your old house that the potential buyer finds?

2a. You need 20% down to avoid paying PMI.

2b. Equity is always good, it's money in your pocket. If you are planning to sell soon and prices are falling, it could be a waste in that case.

1. It is risky. I could afford two payments indefinitely as long as my wife and I both remain employed.

It seems near impossible to wait for the perfect house to come along, then be able to put your house on the market and sell it near instantly to line up with the other new house that got listed. Not to mention that other new house probably will get no contingency offers almost immediately after being listed.

 

[NetWareHead]

It seems that most people I have talked to suggest not attempting to make an offer with a contingency to sell your current house. Instead they suggest buying the new house, and then selling your original one.

So my question is, do people save another 20% down for their next house? If you pay extra towards your first house in the meantime none of that equity will do you any good in this scenario, correct?

Most sellers do not like to get involved with buyers that have a home sale contingency offer. Most want to just sell their home and not rely on the buyer needing to sell his home first.

However, some sellers build into the contract an escape clause that if another buyer shows up and can/will buy the house, the original seller with the sale contingency could lose the deal.

So my question is, do people save another 20% down for their next house? If you pay extra towards your first house in the meantime none of that equity will do you any good in this scenario, correct?

I dont get your last question. ANY money you pay into the the purchase of your next house becomes equity which is beneficial. How would this money not become equity?

 

[Jumpem]

I dont get your last question. ANY money you pay into the the purchase of your next house becomes equity which is beneficial. How would this money not become equity?

My thought was that if I am putting extra money into my current house, and I buy a new house before selling mine that equity does me know good at that time. For example, if I have $50K of equity in my current house I am unable to use that towards the 20% down payment on a new house. I would get that $50K of equity back later after selling the first house.

 

[RaistlinZ]

My thought was that if I am putting extra money into my current house, and I buy a new house before selling mine that equity does me know good at that time. For example, if I have $50K of equity in my current house I am unable to use that towards the 20% down payment on a new house. I would get that $50K of equity back later after selling the first house.

Wouldn't a bank be able to give you a loan to assist with that 20% down payment, knowing that you have $50,000.00 equity in your current home?

 

[NetWareHead]

My thought was that if I am putting extra money into my current house, and I buy a new house before selling mine that equity does me know good at that time. For example, if I have $50K of equity in my current house I am unable to use that towards the 20% down payment on a new house. I would get that $50K of equity back later after selling the first house.

If you know you are selling your house, I'd refrain from sinking more money into it. Unless, it is for improving the property in an attempt to get a higher price. Invest wisely and keep RoI in mind. Otherwise, I would just put the money into the new house and get over the PMI hurdle.

 

[cbrsurfr]

My thought was that if I am putting extra money into my current house, and I buy a new house before selling mine that equity does me know good at that time. For example, if I have $50K of equity in my current house I am unable to use that towards the 20% down payment on a new house. I would get that $50K of equity back later after selling the first house.

You can recast your mortgage after your house sells. Fees are usually $150-$250. Still would need 20% down to avoid PMI.

 

[NutBucket]

Basically yes. If you sell your house and then make a large principle payment then you pmi could be dropped.

To me the bigger issue is having enough income to carry two payments. Or maybe that's just CA problems.

 

[Jumpem]

Basically yes. If you sell your house and then make a large principle payment then you pmi could be dropped.

To me the bigger issue is having enough income to carry two payments. Or maybe that's just CA problems.

Houses are relatively affordable in central NY. My current $150K house has a mortgage payment of $1,209. I don't want anything too nice for my next house. Just a 1,600 - 1,700 sq.ft. ranch with an additional bathroom for my kids and a bit better layout.

I wouldn't be too worried about also paying that $1,209 for two or three months.

 

[thesmokingman]

Basically yes. If you sell your house and then make a large principle payment then you pmi could be dropped.

To me the bigger issue is having enough income to carry two payments. Or maybe that's just CA problems.

Yea, it's more CA and other high value areas. The values here are so high that if you had to ask this, then you can't afford it right?

 

[BurnItDwn]

In 2008 I bought my current house, when I had my old townhouse on the market. Townhouse took 9 months to sell, I sold it for a loss since the house prices started crashing around that time.

I did a 0% down, with a primary and secondary mortgage at the time I moved. It was not smart, I was more or less broke for a number of years without many refinance options due to being upside down on the house. It took me 7 years to pay off the second mortgage, and now everything is more or less financially comfortable, but, It was a scary ride part of the time.

My lot is small, my house is small, no room for a garage, I'd like to upgrade ... but I'm not planning to make a move until after I pay off 100% of my mortgage on my existing home. I'd like to save up at least 10% down payment cash as well, in case it is hard to sell old place, or in case something happens with employment situation...

So, It might be another 10 or so years before I can move with little to no risk.

 

[olds]

1. It is risky. I could afford two payments indefinitely as long as my wife and I both remain employed....

I would never, ever get involved in a financial deal that took two incomes. Things happen/change.

 

[Jumpem]

I would never, ever get involved in a financial deal that took two incomes. Things happen/change.

That is why I generally try to stay as close as I can to being able to get by on the lower income. I have survived five layoffs so I am always weary about being over extended.

 

[blackangst1]

Since it hasnt been said, some new builders WILL let you buy on contingency. Thats what I did.

 

[cbrunny]

Wouldn't a bank be able to give you a loan to assist with that 20% down payment, knowing that you have $50,000.00 equity in your current home?

pretty sure that kind of thing isn't allowed. at least not in ontario.

 

[Jumpem]

Since it hasnt been said, some new builders WILL let you buy on contingency. Thats what I did.

That would be ideal. They build it, and then transfer it when your current house sells?

We were leaning towards new, unless the perfect existing home comes up for sale. I am tired of buying houses and having to put roofs on, windows, furnaces, water heaters, etc. It would be nice to not have to deal with anything major for a while.

 

[Hacp]

Here is what people should do.

1) Rent out your house and move into a short term rental for 6 months. Rent a storage unit if you have too much stuff.
2) Buy new home at 5% down. You'll qualify for the better rates for primary residences as long as you have 30% equity in your old home.
3) Keep your old home as a rental or sell old home.

 

[edro]

We sold our house and moved into an apartment for 3 months, then bought a new house.

 

[Tweak155]

My wife and I just did exactly what you are considering doing. We bought a house in March but the person living there could not move out for 30 days. Trying to line up the sale of our old house and trying to work the logistics could have been rough, as the owner we bought from had UP TO 30 days and could move out any time before then.

Of course, she moved out on day 30. But right now we own 2 houses and have put our old one on the market. Have had a few offers but nothing serious yet.

In Michigan, you get to retain homestead taxes on your property until the end of the year, even if you claim homestead on a new residence. So until the end of December, we get the lower tax rates for both houses.

 

[Xonim]

Wouldn't a bank be able to give you a loan to assist with that 20% down payment, knowing that you have $50,000.00 equity in your current home?

No, they won't. We just went through this in September. We had enough equity in our old place that we could have put 20% down on a new place, but because we didn't have cash-in-hand it didn't work that way. We had to borrow the full amount from retirement accounts to float the 2nd down payment until we could close on our old house and pay the loans back.

Then the fun part was the underwriters added a "small condition" to our approval requiring 6 months of payments for BOTH mortgages to be in a checking account. If I had 6 months of payments, I'd have had a bigger down payment. Duh. Anyway, we had to ask my parents to float that amount to us long enough to close. We closed our purchase on a Friday and our sale the following Monday.

So ... yeah, not going to happen.

Option A is to do what we did.

Option B is to sell your place, move to temp housing, then buy a new place.

I wasn't going to move twice, so option A it was.

 

[purbeast0]

1. Unless you are rich, sounds risky. Can you afford two house payments (for who knows how long) and to fix the stuff in your old house that the potential buyer finds?

2a. You need 20% down to avoid paying PMI.

2b. Equity is always good, it's money in your pocket. If you are planning to sell soon and prices are falling, it could be a waste in that case.

depends on your lender. we put 5% down and do not have PMI. we could have put 0% down and had no PMI as well.

 

[cbrsurfr]

Here is what people should do.

1) Rent out your house and move into a short term rental for 6 months. Rent a storage unit if you have too much stuff.
2) Buy new home at 5% down. You'll qualify for the better rates for primary residences as long as you have 30% equity in your old home.
3) Keep your old home as a rental or sell old home.

Can't always do that. My old house (that I still own) is rented out and that has worked out well. But if I bought a new house my current house cannot be rented out due to HOA.

You are also taking a risk renting out your house for 6 months. Could have nightmare tenants that destroy it, won't leave, etc...

As for storage units that is also a risk, I've used one for a couple months before and it was fine. Some friends stayed in their parents basement for 9 months after selling their house and their stuff was destroyed by bugs. They spent nearly 10K on movers and storage fees for the multiple units they had AND payed extra for the insurance that was worthless. Insurance wouldn't cover anything. I think they got to the point where they just hoped to get the insurance fees back and they wouldn't even do that.

 

[rh71]

I wouldn't be too worried about also paying that $1,209 for two or three months.

But how quickly are properties selling there? Even on LI some houses can sit for 6 months and there are those that sit for well over a year.

A lot of people sell first and move in with parents for a while or just rent. We stayed with my parents for a year, luckily (financially).

 

[evident]

Wouldn't a bank be able to give you a loan to assist with that 20% down payment, knowing that you have $50,000.00 equity in your current home?

I think there's something called a bridge loan, i'm not sure if it's the same.