Home Buying in San Leandro>Question Details

Bahaykubo, Both Buyer and Seller in San Leandro, CA

I own a condo which I want to sell so I can buy a house. Should I wait unit I sell the condo before I should start looking for a house?

Asked by Bahaykubo, San Leandro, CA Wed Aug 31, 2011

I can't afford to pay 2 mortgages. Can I return the condo to the bank? How is this going to affect my credit score? I am planning to withdraw my money from my 401K so I can pay 20% for downpayment. What should my credit score should be (I don't even know it rightnow)
Thanks so much for your help.

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11
i signed a contract on a new condo and i cannot back out, can i sell it before i pay for it, i.e before i close
0 votes Thank Flag Link Fri Jul 5, 2013
You should put your condo on the market so you can get the exposure of a potential buyer and start to consider offers. Get off the fence and start looking for homes. Ideally you want to be in escrow on the condo and your new house at the same time.
When the condo goes on the market we make it a contingency sale, as in it is contingent on you buying a new home. Although many potentiial buyers may be discouraged by your contingency sale and they will keep looking for something they wont have to wait for.
Another way is to sell the condo with a condition that you can rent your condo back from the new buyer for some tiime until you find your new home and close escrow.
Bottom line, get the condo on the market, Its red hot right now with the low rates and buyers are snatching them up in a frenzy.

Jesse Crum
Direct Anytime 510-604-1112
Allaince Bay Realty
CA DRE 01867111
http://www.dreamingrealestate.com
0 votes Thank Flag Link Wed Aug 8, 2012
When you own a home which you want to sell, and you also want to buy a home, there could be a few options...

#1 - you can sell the home and THEN buy the new home. If you sell the home, and you currently owe more than what you would "net" from the transaction, then you will either need to (A) bring in that difference with your own funds or (B) do a "short sale" which will negatively impact your credit as well as potentially prevent you from buying another home using a mortgage for at least 2-3 years (1-day is permissible if you are using VA financing OR with FHA financing if you were not late on the mortgage/other debts for the 12 months prior to the short sale AND are not purchasing a similar or superior home in the same commuting area).*

#2 - you could purchase the home and THEN sell your current home. This would require you to be able to qualify for both mortgages. Since you said you can't afford to pay 2 mortgages, I am unsure if this would be a real option for you.

#3 - you could rent out your condo and buy a new home. This would also require you to be able to qualify for both mortgages. Although, you may be able to rent your condo out simultaneously to help you qualify, but you could only use that rental income if you have sufficient equity in your condo (at least 25% equity is needed, potentially 30%). You should also have a strong desire to be a landlord.

As far as credit score, ideally a 740 will get you the "best" interest rates, although quite a bit lower, down to a 620 score, can qualify with many lenders, and even quite a bit lower than that with a few lenders. Scores are important, but any delinquent marks on your credit can be just as important - including if you do a short sale - as there are certain guidelines depending on the loan program & the details of the delinquency.

* If you do have a short sale, and you don't fit the "1 day" guideline or you aren't short selling because of an extenuating circumstance (job loss, medical, death of a wage earner, etc.), then you will be looking at 2 years with a 20% down payment.
0 votes Thank Flag Link Wed Aug 31, 2011
Bahaykubo...if I understand your question, I think you've answered your own question....by not being able to afford two mortgages, you're saying that you can afford the one...which right now is the condo. One of the requirements for a short sale is to demonstrate hardship, which if you're able to make your mortgage, you generally don't have one. You can't simply return the condo to the bank, as in a trade-in. If you have assets, the bank will be very reluctant to approve a short sale....

It certainly doesn't hurt to start the new search, and put the condo on the market. The best starting point is to see what the value of the condo actually is and whether it will payoff the mortgage. Contact a local agent to have a market analysis performed.
0 votes Thank Flag Link Wed Aug 31, 2011
Magandang gabi po

Returning to the bank suggests deed in lieu of foreclosure which is akin to foreclosure. If you do that, then you may not qualify to buy another property.

You may want to sell your property first, and still look around to see what's available. You can always try to write an offer on another house, contingent on your selling your condo first.

If you're "underwater" on your condo, you may want to consider a short sale. Although the effect on your credit score is about the same as a foreclosure, the time it will take for you to qualify to buy another house is a lot shorter when you do a short sale than if you foreclose (which may take 7 years or so for you to again qualify).

Quite a few options. Tawagan po ninyo ako para maipaliwanag ko sa inyo.

Take care and good luck
0 votes Thank Flag Link Wed Aug 31, 2011
It does not hurt to start looking (at least on the internet) for a new house. You ask about returning the condo to the bank, you can't simply give it back to them. If you are upside down in your loan, then you can consider a short sale. If you take that route, it will dramatically affect your credit score. And even if your credit score is currently near perfect, banks will make you wait months/years before loaning you any money (that is even if you borrow from your 401k).
0 votes Thank Flag Link Wed Aug 31, 2011
When you say "return the condo back to " it sounds like you owe more than the condo will sell for. In that case it will be a short sale and will definitely effect your credit and in most all cases you would be unable to secure a loan for 18 to 36 months. a person with a credit score of 680 that short sells their house can expect to have a credit score of around 575 - 595 after the sale. you will also need to prove a hardship for the bank to approve a short sale.

(The above stats were taken from FICO’s Banking Analytics Blog.)


If you are not short selling I would definitely sell, then start looking. Have a realtor such as myself set you up on a listing alert that will email you when homes in the area and specifications become available.

Please call me with any questions. Do your homework before making any decisions.

Best regards,

Eric Soderlund
925-337-1897
0 votes Thank Flag Link Wed Aug 31, 2011
If you are upside down on your mortgage and can't afford to pay two mortgages there are a couple things going on. First, you may not qualify for the second property while holding onto the condo at the same time. This currently is a lender qualification and I have multiple fantastic lenders that can answer that question definitively for you. Secondly, if you're upside down on your condo mortgage and give it back to the bank then that would be a short sale or deed in lieu of foreclosure, both of those options can negatively affect your credit and your purchasing power for about two years.
Either way, a conversation with a lender of your financial options are paramount in this situation even considering your money coming from a 401K
Either way you can feel free to call me anytime for a honest and straight forward discussion of ALL of your options

Dave Kelly - Realtor ®
510-499-6994
0 votes Thank Flag Link Wed Aug 31, 2011
Hi Bahaykubo,

I always advise my clients to sell first. That puts you in a much stronger position when you start your search. You can offer to rent back your Condo while you search or stay with family and friends. Getting an offer accepting while needing to sell your home will make sellers uncomfortable and they won't want to wait.

I hope this helps!

Tim Ambrose
Realtor
Web Reference: http://www.timambrose.com
0 votes Thank Flag Link Wed Aug 31, 2011
I would wait and sell your condo before you buy a new one. Even if you your pulling out 20% for the down payment. You can return the condo to the bank but it will kill your credit and will make it harder to buyer a new one. Sell your condo first!!
0 votes Thank Flag Link Wed Aug 31, 2011
If I were you I would sell first.So I could find out how much money I would be able to spent for my purchase.Thank you.
0 votes Thank Flag Link Wed Aug 31, 2011
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