Save up 20% to move to a new house?

[TwiceOver]

Personally I wouldn't risk it, but that's me. Put on market with a 90 day closing and hope you can find something in 3 months otherwise find a short term rental.

 

[Subyman]

I never take a contingency on a house sale when working contracts. Ideally you'd sell yours and move in with family as you find another house or try to time the closings relatively closely, but you'd be betting that your buyer doesn't back out which is more common than you'd like to think.

 

[PricklyPete]

Houses are going quickly in our area. Selling a house is easy, but buying a new house is very hard. What some people have been doing is putting a clause in the sales contract that gives the seller the right to rent the house they are selling up to X number of months. This gives them some time to find something new. Haven't done this myself, so I don't know specifics, but it seems to work well in this market.

 

[thomsbrain]

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

In CA's urban areas, renting a starter apartment will take two incomes.

As for the OP, it depends on the market. Yes, in CA's urban areas it will be a challenge to purchase any home if you aren't willing to waive all contingencies, period. There will be 20 people lined up behind you with full cash offers, so if you're financing, you'll need both the highest offer and no contingencies.

However, you CAN do this without selling your home: refinance your current home with a cash-out refi. Use the cash for the down payment on the next house, plus the buffer to pay two mortgages while you sell your current home. Luckily, your current home should sell just as fast as the one you bought. Alternately, you can sell first with a rent-back contingency so that you have cash in hand and can look for the next house while renting your old one. Because it's a sellers market, you will find a buyer willing to accept the rent-back.

20% doesn't make much difference as long as you are okay paying PMI and you are waiving contingencies. Banks are happy to make standard loans at normal rates for less than 20% down as long as your credit is decent. I've heard 5% down is easy. PMI sucks but you can cancel it quickly once market value builds your equity to 20%, and loans rates are not likely to ever be much lower.

 

[cyclistca]

A lot depend on the housing market in you area. We bough our house before selling the condo we living in. We negotiated a long closing date which gave us plenty of time to sell our current place before we had to take ownership.

BTW our housing market is super hot. There would be no way you would even get an offer accepted with a contingency of having to sell your current property. We even had our current home inspected before we made our offer so we could go in with zero contingencies.

 

[Jumpem]

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).

I would think it wouldn't take too long being an affordable house in a popular neighborhood. Moving twice isn't an option, and living with parents certainly isn't.

 

[Jumpem]

Personally I wouldn't risk it, but that's me. Put on market with a 90 day closing and hope you can find something in 3 months otherwise find a short term rental.

In that scenario I would only put it on the market when the perfect house came along. And if it didn't work out I would take it back off the market. Realtors would hate me because my house would only be for sale briefly if the new house didn't work out.

 

[blackangst1]

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.

Essentially, once you find a builder you like, you go into contract with them, with contingency. You work with the lender who knows youre on contingency, and get "pre-approved. At this point, your rate isnt locked, but at least you get an idea of financing.

Put your current house on the market. Now, here is where it can get tricky. Youre more than likely going to have to move twice going this route (once out of your house when it sells and into apt/rental house/whatever, then again to the new house when it closes). Some people play the game of waiting until the last minute to list their house to shorten the amount of time in a rental, but IMHO thats risky. Buyers are finicky, and no one can predict the market. We got lucky and had an offer within 48 hours of listing, but I know of others whose house sat on the market for 9 months. Then youre kinda fucked.

Once your house sells and you get all your proceeds, you keep it in the bank and figure out if youre paying down debt, what youre going to put down on the new house (which you'll need to get an idea of when you go into contract with the new lender), and wait. You'll be out of contingency at this point, get your rate locked, and financing will move forward. You dont want to make ANY changes to your credit other than paying it down. Dont charge anything, dont apply for anything, NOTHING. At this point the lender will pull again to get you out of contingency, and approve you on that pull. As you prolly know they pull the day you close to make sure nothing has changed.

Then you wait for the house to be built. In the mean time you'll meet with low voltage guy to figure out what/where/how you want any custom wiring like cat6, speakers, etc, go to the design center to pick out stuff like cabinets, interior hardware, etc. As a side note, before you do this DO YOUR RESEARCH FIRST. Have a general idea of cabinet woods, colors, etc BEFORE you go. Otherwise you'll be extremely overwhelmed with choices. My general rule of thumb is only order stuff from the design center you cant do yourself i.e. cabinets, flooring, etc. Stuff like ceiling fans, faucets, etc are usually cheaper, and best to not have on your mortgage. With that said, you should have an idea of what you want and how much it is at Home Depot etc and at least ask at the design center what THEY charge. In our instance, it saved us almost $600 ordering door hardware (handles and hinges) going through the design center. Also blinds. Do those yourself after the house is built.

Anyway hope that helps. We're in the waiting period now, foundation was poured yesterday, so framing will be next. Its a very exciting process!