sumo, Home Buyer in Bothell, WA

Do you answer financing related questions as well.?

Asked by sumo, Bothell, WA Tue Nov 15, 2011

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Thanks Dee Dee. The local piece of this is that there is an assumption in Sumo's question that Redmond will appreciate more than Bothell. But Redmond is hot, hot, hot and not going down in certain Elementary Schools that are not near a busy road or electric towers or sitting under a cell phone matter how much they try to make that cell phone tower look like a tree by painting it green. :) Sumo has revealed a few things known only by professionals who are experts in Redmond and Bothell. And the trade "up" is not as simple as Bothell to Redmond.

More care has to be taken as to WHERE in Redmond, and not just assume all of Redmond is going to appreciate more than all of Bothell, as that is not the case. The tail end of a development with only a handful of homes left needs to be studied very closely, and a new home will depreciate much faster than a used home, the same as a car.

If the purchase were a used home in the same neighborhood in Redmond selling at a discount because it is a short sale...the trade might make sense. But to buy a brand new house and think it is going to appreciate more than the Bothell house...that's like thinking a brand new Honda is going to appreciate more than buying a 2008 Honda. The new one is going to lose value the minute you pull it off of the lot.

The odds of having two houses underwater next year vs just one are much higher if the 2nd home purchase is a brand new house in a large neighborhood with "only 5 remaining". Also the variance between Rockwell, Einstein and Mann Elementary Schools is dramatic. Good homes fly off the shelf in Rockwell and Mann while some awesome homes in Einstein are sitting on market for LONG periods of time and are not selling. If you could push the house into Rockwell or Mann it would sell in a heartbeat. So knowing the price dynamics of Redmond is very important for Sumo...and not merely the assumption that Redmond is matter where the home in Redmond is.

In this case the Bothell house may in fact have a higher potential for increase from today's value. Not sure, because I don't know where his current house is...Bothell's a big place :) But if you check the Elementary school of the Bothell house vs the Redmond house noted...odds are the Bothell house is at least equal as to value considerations from today moving forward from here. If that is the case...the only thing Sumo will accomplish is doubling his debt load.
0 votes Thank Flag Link Thu Nov 17, 2011
Sumo, Sending out Kudos to Ardell....her comments are pretty spot on. I am assuming the you will qualify for both mortgage payments, with no credit for rent...because that is what the lender will require in most cases. If you qualify and you have read Ardell's comment a couple of times, it might make sense to go forward with an offer.

However, as real estate agents and mortgage consultants, we can provide you great expertise on properties and financing...but the crux of your situation is how would buying, renting, selling impact your tax situation. I absolutely encourage you to talk with your tax planner or a certified financial planner. Remember, the agents and mortgage consultant involved in the purchase have a vested interest in you buying the house. Just because you can qualify for the financing does not mean it is the best situation for you.

Borrowing from my seamtress days: Measure twice, cut once. This could be a huge error if you make a mis-step. BTW, how much of your current mortgage would be covered by rent? Do you have the reserves to cover both houses in case you lose tenants?
0 votes Thank Flag Link Thu Nov 17, 2011
There's an old saying, "Don't throw good money after bad". Consider how you will feel a couple of years from now owning two homes that are underwater vs just one.

I say this piecing together a couple of things. If you have a jumbo loan on your current home, the odds are that you will have a short fall between the mortgage payment and what you will be receiving as rent. You will have the care and maintenance of two homes vs one. It is not necessarily true that you will gain on one what you have lost on the other, especially if you buy a brand new home In the location you named.

If you are moving to improve the financial aspects of the situation, it doesn't make a lot of sense. If you are simply not happy where you are...if you bought the wrong house in the wrong place for you and your family vs at the right time financially, then maybe. But if that IS the case you need to be careful not to repeat the same mistake.

You express the dilemma in terms of improving your financial picture. I don't see how buying a 2nd home is going to improve your situation financially. But if your primary reasoning is because you simply want to move and are not happy where you are...but that is not what you are saying.

If you indicated you were buying a screaming deal priced under current market value...perhaps it would balance out as your friend suggested. But the end result given what you have said, is more likely to be that you will own two houses that are underwater vs one and the rent will not cover the full nut of the one you have now.

You are concerned about the debt you have now. Burying yourself in more debt is not usually the answer to that problem.
0 votes Thank Flag Link Thu Nov 17, 2011
If your lender says he is able to qualify you for this type of loan and you have made him fully aware of your financial situation then I assume he is guiding you in good faith.
Be sure to ask yourself the tough questions on what it will cost to turn your existing home into a rental. Do your due diligence and consult a property manager as to what is realistic to ask for in rent. Will it cover loan,tax and insurance costs you now have?
As to your concern about the interest rate. You can always do comparitive shopping but find out up front if doing so will hurt your current credit score. Too many inquiries may have a negative affect and damage your ability to get the best rates. Which ever direction you choose to go asking questions and seeking answers is sound practice.
0 votes Thank Flag Link Thu Nov 17, 2011
Chuck. Thanks much for your response. Makes me think. My lender called us today and said he is able to get us the approval for the loan and has told my broker to start preparing the offer papers. we indicated to him that we are talking to our tax consultant also before taking a decision. The interest of the loan initially indicated was 2.9% but he said he could not get it lower than 4.75% which we do not like at all. but what scares me is your legal part. Do you think anything is going wrong here.
As you said looks like we should talk to another lender. I am not sure how this lender is getting loan for us if the proposition is not all that good. (to add he is lender of the community we are trying to buy the home is, is that the reason? - its the MF community in redmond)
0 votes Thank Flag Link Wed Nov 16, 2011
OK. From what you now describe it appears you will soon be underwater and over your head in your mortgage debt. My first thought to what your friend suggests would make sense if you owned your 1st home outright, but not if you are already paying a primary home loan. From my understanding your current home would be considered a debit not a credit against any new loan. I think it maybe time you seek legal advice. I would recommend you discuss your situation/options with a professional. At the very least explain your plan to a lender you trust to see if your plan is even possible.
0 votes Thank Flag Link Wed Nov 16, 2011
Let me write down my questions here and seek your advice.
We bought this house in 2007 in the worst time period maybe, was misled by my lender (he represented the community so he had to sell it to us, our bad, our ignorance); we are now into a jumbo loan with 7 year arm. Not owned by frennie and freddie. Neither the current lender now anyone is ready to refinance the loan. Our loan to value ratio also seems real bad. (125%).
So one banker adviced us to forget the thought of making the situation better with our current loan, unless we are able to put huge money down and refinance....The numbers are terrifying!!!
A close friend suggested, we start thinking outside of box, make use of situation and see if we can buy our second home, at a real good price as market is favorable to a buyer, rent this house and eventually sell it. we surely wil lose on it but will gain on our new home; as its in a better community and area.

Now, is it advidable to have two jumbo loans, how will it impact us. we seems to be able to afford it, but cant imagine the impacts. What disadvantages will we see in negotiations with our situations. are we thinking straight at times I feel we are in a royal mess..................
0 votes Thank Flag Link Wed Nov 16, 2011
Hello Sumo,
When it comes to Finance related questions I generally refer to my lender. They are,after all, the experts with regards to lending/financing. However, if it has to do with possible shortfall or potential short sale situation regarding financing, I shift to my office short sale team for their expert advice.
As often happens buyers and sellers seek important decision making questions from realtors. As a realtor my task is to put you in contact with those who can best provide you with the knowledge you seek. If this sounds like sound advice to you then feel free to contact me for specific and I will do my best to help you find the answers you seek.
0 votes Thank Flag Link Wed Nov 16, 2011
Generally yes and there are some lenders here to answer as well. Depends on the question.
0 votes Thank Flag Link Tue Nov 15, 2011
sure, why not? Broker's and agents need to be a bit familiar with financing options and availability.
0 votes Thank Flag Link Tue Nov 15, 2011
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