Eyal Tropen - Sr. Loan Officer

NMLS # 874253

Q: It's time for us to move to a new home. We know that our house can probably be sold within a week, but we are afraid that it will take a few months to find a new home ... Sellers do not want contingent offers, and we do not want to rent... 
Do we have to wait for the market to calm down?

Indeed, the demand for real estate in our region keeps breaking new records, creating a definitive "Sellers' Market" in which multiple offers are received for almost for every listing, often closing tens of thousands of dollars over the asking price. In such a market, any contingency of limitation greatly diminishes the chance an offer would be accepted.

Why do most people think they must sell their previous house before you buy a new one?

The main reason is to use the proceeds from the sale as down payment on the new home. To solve this, I may be able to structure your transaction with alternative sources for the down payment:

  • Bridge Loan on your Departing Residence: A short-term loan (up to 6 months), at a very low interest rate, and without monthly payments, allowing you to access some of the equity in your old home. (This is a unique product, not offered everywhere)
  • Home Equity Line Of Credit (HELOC) on the Existing or on the New Property: If you need to access a higher % of your equity, or need a longer time frame, a HELOC may work for you. However, interest rates are higher, and monthly payments are required, which negatively impact your Debt-To-Income (DTI) ratio.
  • Retirement Fund Loans: Your 401K may allow you to take a short-term loan at a reasonable interest rate from your retirement funds. Since you are essentially borrowing your own money, it does not affect your DTI ratio (it is advisable to check with the financial advisor the long-term implications and tax implications before attracting or lending money from pension accounts)
  • Smaller Down Payment on the new home: True, if the down payment is less than 20%, you may be required to pay mortgage insurance (there are loans that do not require PMI), but as I explained in a previous article, the increased cost is often lower than the price of waiting ...

Another reason is when the income is not high enough to support the monthly repayments of 2-3 mortgages simultaneously (even if for a short time). Here too, I have options that may help:

  • Debt Exclusive Bridge Loan: If your departing residence is already under contract for a cash sale or with an approved mortgage, this loan allows me to exclude the payments on your existing mortgage from your DTI calculation.
  • Conversion of Departing Residence into an Investment Property: With just a signed contract and first/last deposit, I can often use the expected rental income to offset your current mortgage, insurance, and tax expenses. If you still need the equity for the down payment, I may be able to assist with a Cash-Out Refi, or you can try to get a HELOC. I strongly recommend you check with a financial advisor and real estate agent if this step is right for you.

If these solutions do not suit your situation, you may still want to try to make a strong offer above asking price, supported by a Fully Underwritten Mortgage Pre-Approval -  your Loan Officer should call the Listing Agent to explain why they should consider such an offer and why it should not result in a major closing delays compared to other offers…

Copyright © 2018. Eyal Tropen NMLS # 874253
Residential Mortgage Loan Originator Licensed in CA, OR, TX, WA

American Pacific Mortgage | NMLS #1850
625 4th Avenue, Kirkland, WA 98033 | NMLS # 1055557
Phone: 425-922-1055 | Fax: 855-549-8730 
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Master Builders Association