01/13/2023
Do You Need To Sell Your Current Home When Buying Your Next One?
When considering purchasing another home, you often assume you must sell your current home. This is not always the case. If you are interested in keeping your existing home when moving on to the next one, review and understand what it entails and the actions you might need to take to allow you to keep your home. Reviewing your options is never too soon, as some actions will require time to implement, such as debt consolidation or improving your credit score. Read the summary of the 7 steps to decide what is the best solution for you.
1. Renting your current home: Can you rent your home, or are there any legal restrictions limiting you from renting your home?
2. Current home equity: You need to know the home equity in a cash amount and the home’s liens as a percentage of your home value. Knowing the numbers will allow you to know your options.
3. Current home income and expenses: Will the future income cover your costs if you keep your home?
4. New home price range: By deciding the price range of your new home, you will know how much money you will need for the down payment and estimate the associated costs. How much money do you need to prepare for the move? Do you have the money? Do you need to save for the down payment, or can you do a cash-out refinance with your current home to have the money in the future?
5. Qualifying for the new home’s mortgage: Knowing the qualification criteria will help you prepare in advance. In addition to a good credit score, credit report, and qualified income, I emphasize the impact of the Debt-to-Income (DTI) percentage. You do not qualify based on the amount of income but rather the percentage of all your minimum monthly payments of your debts, divided by your gross income. Each mortgage program has other requirements that can vary based on your credit score.
6. Debt-to-Income (DTI) calculations: Ensure that the debt calculated is actually the debt you are paying. For example, if you co-signed a loan for a friend or a family member, that debt shows in your credit report as your debt, even though someone else is paying it. If you can prove that someone else is paying the debt, the lender can remove this liability from your DTI calculation.
7. Do you want to be a landlord?
You have checked if you can afford to keep your home. If you can, balance the advantages and challenges to make the right decision for you. Keeping your home will provide you with valuable financial benefits while you can have unexpected expenses. Balancing it all, what path allows you to reach your financial goals better, and what option are you more comfortable with? Make the decision that is best for you.
For more information, go to www.AskOrli.com
I am the author of “Your home, your money: How to leverage home ownership and avoid costly mistakes,” the product of many years of experience as an Architect, Realtor, Rehabber, Real Estate Investor, and Mortgage Loan Officer. I moved continents and countries, changed languages and professions, ...
