Home Buying in Uptown>Question Details

Suzanner, Home Buyer in Uptown, Minneapolis,...

I'm unsure where to begin and I do not fair well with pressure; is there such a thing as using current home equity as a down payment?

Asked by Suzanner, Uptown, Minneapolis, MN Sun Sep 20, 2009

I might be interested in buying a yet-to-go-on-the-market place. I want to use my current mtg equity for the down, then put my place up for sale, move, then adjust the mtg pmts accordingly, assuming that the DP is significantly less than the actual equity earned. Can this be done? Whom do I need to talk to? The sellers will represent themselves in this case.

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Bridge loans were common when things were selling fast. They are risky now. Do some interviews of Realtors, get some idea of your selling price.. You need a realistic view of your chances and the price. Under 300k is moving in most locations. Find out what the pending to active ratio is, gives you a feel for your chances. Buying one house without comparisons is a very dangerous situation. Liquidity is the term no one thought about when buying. My last post was to a couple who can't sell their loft for what they paid. Now they have a baby.
0 votes Thank Flag Link Wed Sep 23, 2009
Hi Suzanner,
Ok first things first how are you planning in tapping into that current equity?
The three ways you could do that is a refinance, a second mortgage, or a bridge loan.
The first two are only available BEFORE you were to list or even talk to someone about selling, as the lenders don't like to do "short term" loans. They make their money on people keeping the loans and paying the interest. The Bridge loan is made for this type of thing. The problem is that rates are normally high and their is the issue of how long it will take to sell your home. In the time you would be taking to sell your home you would have three payments:Bridge Loan, New Home Loan, Current Home Loan.
So when you go to buy the new home the mortgage company will take into account all those expenses when qualifying you.
The next part is the using the remaining equity after the sale of your home to lower your monthly payments. This is called recasting, and not a lot of mortgage companies will do it. Normally what you end up doing is putting the payment to the principal therby lowering the amoutn of time you will have till it is paid off but not your lowering your payment.
So basically you could do what you are talking about with a bridge loan and then getting a new loan that is recastable.
It doesnt matter that the sellers are doing For Sale By Owner. If you have any further questions you can contact me at sean@spectrafinancial.com
0 votes Thank Flag Link Mon Sep 21, 2009
You didn't mention this but I would get a market analysis and see how quickly places are selling in your area. If you can get it sold quickly, this would absolutely be the easiest and least expensive way for you in the long run to get you into your new home. Some areas of uptown are VERY desirable and sell quickly. Let me know if you have any questions.

Kim Eisen
Realtor since 1980
RE/MAX Specialists
0 votes Thank Flag Link Sun Sep 20, 2009
As everyone Mentioned, no need to Contact a Home Mortgage Consultant.
Also, what you are trying to do is nothing new and many lenders are aware of it.
Most proably you will need to have certain equity , about 70% on yoru first home to buy a second home.
Is your current mortgage FHA or Conventional? Are you downsizing or up? Most leders will not "believe" that you are buying a cheaper or smaller home that your current one to live on it.
Whats it the reason of trying to buy a "friends" home? Trying to lower your payments? Moving close to work? Family?

You might need to quilify for both mortgage payments.

Best.
0 votes Thank Flag Link Sun Sep 20, 2009
Sorry my keys are sticking! One other thing, if you are feeling pressured i wonder by who or why? I think you anwsered your own question. You should not feel pressured or may not be the right decision for you. Just a thought.
0 votes Thank Flag Link Sun Sep 20, 2009
What you're suggesting is possible but a delicate dance.
Steps to take:
1) determine how much to offer on the new home
2) determine rough value of your current home and amount owed on current mortgage(s)
3) contact your bank or another lender to ensure a line of credit (LOC) or home-equity line-of-credit (HELOC) are possible, how much the cost is (closing costs) and how long it will take to have access to the money
**note: they will ask what you want the money for and when you tell them as a down-payment, your costs will go up, including the interest rate
4) once you determine the game-plan will work, contact a real estate agent or a real estate attorney to assist with the paperwork and to advocate for your interests in all of these complex transactions

Good luck!
Steve Hoem, Edina Realty (763-494-8183)
Web Reference: http://TheHoemTeam.com
0 votes Thank Flag Link Sun Sep 20, 2009
There are better ways to do this than a Bridge Loan, and my suggestion would be to contact a loan officer that you are comforable with to discuss the specifics.


Good luck.

Sincerely,

Scott Hutchinson
Edina Realty
scotthutchinson@edinarealty.com
http://www.scotthutchinson.edinarealty.com
C: 612 396-0692
0 votes Thank Flag Link Sun Sep 20, 2009
There are better ways to do this than a Bridge Loan, and my suggestion would be to contact a loan officer that you are comforable with to discuss the specifics.


Good luck.

Sincerely,

Scott Hutchinson
Edina Realty
scotthutchinson@edinarealty.com
http://www.scotthutchinson.edinarealty.com
C: 612 396-0692
0 votes Thank Flag Link Sun Sep 20, 2009
You will need to speak to yor lender about this but it is called a bridge loan. You bridge the equity from your current home as down payment for new home. Be careful and possible consult your attorney. The thing is, you will have to continue to make payments on the current home as well as, the new one. The lender will make sure you qualify to afford payments but also look at your situation as to how long you cold afford to do if current home does not sell.
0 votes Thank Flag Link Sun Sep 20, 2009
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