Each situation is unique, which may lead you to having different options to purchasing your next home. You may not have to sell your current home to purchase the next one.
You may be able to qualify for both properties.
You may be in a financial position where you qualify for both your current residence and your new house.
Qualifying based on your Debt-to-Income Ratio is one thing, but you will also have to remember to budget for the additional expenses of each property. These things may include your mortgage payment, property taxes, hazard insurance, and any other unexpected repairs that you may have to pay for.
You can rent your current property.
If you can’t qualify for both of the mortgage payments, you may be able to rent your current property in order to purchase the new one.
With this scenario, the lender can typically only count 75% of the rent you would receive for the home. That means that you would still have to qualify for 25% of the mortgage, plus the new mortgage you are about to take on.
Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank. Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.
You can get a Home Equity Line of Credit to purchase the new property.
You can use your current home to purchase a new one by getting a HELOC. A HELOC is like a credit card. You can borrow any amount up to the limit – which would be the equity that you have in your house.
You can refinance your current home and pull cash out.
Like a HELOC, you can tap into the equity to purchase a new home. The difference between a cash-out refinance and a HELOC is that with this you wouldn’t be creating another revolving account. It would be one loan, just replacing the mortgage that you are currently paying for your home.
What if neither of these options are for you?
If you don’t like the idea of paying two mortgages or renting your current property, then you will have to sell.
If you would like to have an estimate of your home value and how your neighborhood is performing, give us a call and we can refer you!