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Jeff Hoffman's Blog

By Jeff Hoffman | Broker in 95630

Buying in Folsom Before Selling: Be Sure You're Qualified

Buying in FolsomWhen people contact me about selling their current home and purchasing a new one, they sometimes don't know what to do first. They are often confused and concerned about buying a new home before they sell the one they have, or selling the one they have before they have a new residence to move into.

From my viewpoint, buying a new home in the Folsom area before selling your old one has its advantages, including knowing where I'll live next and skipping life in a hotel room or other interim rental. However, we must know the possible pitfalls as well, says an article on the Inman News website.

If you're buying with cash-on-hand and don't need a mortgage (or much of one), I agree that it makes sense to buy first, especially if you're keeping your current home as a rental investment. However, many homeowners can't meet today's meticulous mortgage qualifications, and we need to know if we're in that category. These criteria include being approved for the mortgage on the new home and coming up with mortgage, property taxes, and homeowners insurance (PITI) for both properties. Your debt ratio can't exceed 45 percent of your gross income, and your credit must be above-average.

If rather than selling you will rent your current home to a tenant, Freddie Mac and certain other lenders will allow you to use 75 percent of the rental income to qualify for the mortgage on the home you're buying. But there are strict guidelines, including a home appraisal with a rent survey and at least 30 percent equity in the home. You must give the lender a copy of a signed lease agreement and a copy of either a cleared deposit check or the check for the first month's rental payment.

Renting, however, has its drawbacks. You could suddenly find the home vacant if your tenants lose their jobs, or you may have to lower the rent just to attract potential renters. If this happens, your costs might exceed your income.

If you can't qualify to buy before selling, you might consider using the equity in your current home to get cash for a down payment. But in high-demand, low-inventory markets, even a 10 or 20 percent down payment won't compete with multiple offers. Today's sellers want to see cash and will often go with a buyer putting 30 percent or more down, even if the house sells at a slightly lower price.

No matter how you do it, I believe now is still a good time for trading up on your home, especially if you're buying for the long run. Knowing the pitfalls as well as what your budget can handle will help you make the best decision possible.

If you are interested in buying a short sale property, buying before you sell can put you at an advantage. This can be tricky. With my experience in working with buyers and sellers in Folsom, as well as with short sales in the area, I can offer you great advice if you want to buy a new home before you sell your old one.


By Doug & Bud Zeller,  Sat Feb 19 2011, 20:41
Great information for anyone buying!
Get a prequal opinion form 2 lenders.
Honest answer and suggestions from them will really help YOU!

Other information and articles at: sierraproperties.com

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