We just bought a house for 175k and is now listed at 220k, if we sell and buy new house do we just pay the diff or do we have to re-qual for loan?

Asked by Chris, Farmington, MN Sat Nov 26, 2011

We are planning to sell if the price hits 250k and buying a new house for at least 180k-190k. We have only made thus far 3 mortgage payments.

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Gail Strom’s answer
Gail Strom, Agent, Apple Valley, MN
Mon Jan 27, 2014
Great question, Chris. Anytime you purchase a new home or even refinance one that you already own you will need to re qualify. I work with buyers and sellers in Farmington, and have for a long time. Feel free to visit my website for some references from my Farmington clients.
Gail Strom
0 votes
Don Tepper, Agent, Burke, VA
Sat Nov 26, 2011
You have to requalify.

As already stated, the proceeds from the sale of your current property are used to pay off your current loan. That loan--that mortgage--is dead. Kaput. Period.

However, if you do end up with some cash, you can roll that over into the new property, reducing the needed amount of the new mortgage.

It kind of sounds as if you're trying to "flip" properties. If so, though, you're doing it all wrong. You're not leaving yourself nearly enough "margin." And the transaction costs will eat you alive. Further, that's assuming that you really were able to buy a house for $45,000-$75,000 under market.

Also, I'm confused. You say the house is listed at $220,000 but you're planning to sell if the price hits $250,000. What happens if, today, someone makes you an offer of $220,000? Would you sell? Technically, you wouldn't have to (though you might still owe your Realtor a commission), but it doesn't seem ethical to list a home at $220,000 if you're really not going to sell unless you can get $250,000 for it.

One other thing--and check with a loan officer or mortgage broker on this: Lenders don't like to make short-term loans. If you were lucky enough to get an offer tomorrow, a lender might be reluctant to give you a loan on the new house you'd like to buy.

And--if you bought a home for $175,000, why is your next goal a home for $180,000-$190,000. It probably would have been easier just to have gone with the larger purchase initially. And if you didn't quite qualify, maybe you could have saved the $5,000-$10,000 you'd have needed. Consider: The cost of selling your home for $250,000 (with commissions, closing costs, etc.) probably will run $15,000-$20,000. You'd have been better off just spending the $5,000-$10,000 in the first place.

Bottom line: Obviously, you've got some strategy or goal. And that's fine. But I think you might be able to benefit from a bit of advice on how to best get there.

Hope that helps.
1 vote
Rachel Long, Agent, Savage, MN
Thu Nov 15, 2012
Hi there,

Talk to a loan officer first, you will need to qualify for a new mortgage. You would then take your proceeds from your sale, pay off the existing mortgage and use the rest for a new down payment on your home! Good luck!
0 votes
Ravit Berg, Agent, Apple Valley, CA
Tue Jan 31, 2012
Hello Farmington seller,

I would love to help you with your home.

Feel free to contact me anytime.

As an experienced real estate agent, I know what it takes from start to finish helping buyers and sellers to get BEST outcome. I bring expert knowledge, valuable experience blended with the latest technology, a well-defined marketing plan, a comprehensive network, energy, enthusiasm and the excitement of a job well done

I would love to help you buy a home. I am very familiar with your area. I myself live in Farmington for the past 7-8 years.

Please contact me today.

My contact info is below.

Thank you,
Ravit Berg.
Ravit Berg @ RE/MAX Results

Cell - 952.334.4179 | F - 651.460.1272
ravit_berg@hotmail.com | https://www.facebook.com/ravit.berg
0 votes
Sally Grenier, Agent, Boulder, CO
Sat Nov 26, 2011
I'm confused by your question. You just bought a house for 175K, and you're re-listing it now for $220K? Or are you thinking that the value has gone up to $220K? Where are you getting your numbers from? DO NOT use numbers from sites like Zillow or Trulia. These numbers are notoriously inaccurate. Talk to your REALTOR. If you sell your house, that loan gets paid off. When you buy a new one, you still need to qualify for a new loan. (it's not like a 401K where you can just roll the loan over). There are also tax consequences, since you've only owned the home for a few months, you'll have to pay capital gains.

Also, remember that as a seller, you're going to have higher closing costs, since you typically have to pay the real estate commission (could be as much as 6%). Again, talk to your REALTOR and find out what you stand to NET out of the deal after you pay closing costs, and capital gains taxes.
Web Reference:  http://www.sallygrenier.com
0 votes
Shanna Rogers, Agent, Murrieta, CA
Sat Nov 26, 2011
Hi Chris,

When your current house sells, the proceeds will be used to pay off the current loan(s) and if there is anything left after all closing costs, you will receive that amount. To purchase a new home, you will need to qualify for a new loan (on that property) unless, of course, you can pay all cash.

Shanna Rogers
SR Realty
0 votes
Lenny Frolov, Agent, Brooklyn Park, MN
Sat Nov 26, 2011
You would have to get a new loan, the old loan is not transferable to the new property. Even though you recently qualified for the current loan the process will be the same for the new loan.
Web Reference:  http://www.lennyfrolov.com
0 votes
Keith and Sh…, Agent, Apple Valley, MN
Sat Nov 26, 2011
You will need to qualify for a new loan. If you made a profit on your sale you will have some tax consequence but you may then you may also qualify for a different loan product that is better for you.

You mentioned that the property was listed. Your agent should be able to answer all of your questions.

Keith Hittner
Web Reference:  http://www.hittnergroup.com
0 votes
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