buying new home in massachusetts

mass2007 · Joined: 09 Aug 2007 Posts: 2

hello all. i would like advices please about my situation:

my situation is like this:

i put my house in the market coz i'm moving into a smaller house with lower mortgage hopefully. due to divorce, i refinanced to buy out ex-wife. i paid $430,000 for the house, i owe $268,000 mortgage, and my monthly payment is about $2000.... now, i found a buyer, signed an offer of about $408,000 for the house that i owe $268,000 on. if everything's good with the house inspection and other paper stuff, the closing date will be on sept. 14. i know that i need to find a new home and i have to leave my house before the closing date. luckily, i found one i liked. i want to buy the new house and the seller wants $300,000 for it. my plan is to put down $50,000 for it (the money will come from the selling of the house) and finance $250,000. but the problem is, i cannot get a pre-approved unless i have some $20,000 in his account and pay of my $5,000 credit card bill. of course i will have that amount of money after the sale of the house. i'm afraid i won't have any place to stay after the closing date. i have the usual stuff to pack... clothes, appliances and etc..i'm more worried about where to store my equipments ( i'm a landscaper..) i'm currently employed and do little stuff of my own too. i got good credit history.

how do i go about getting pre-approval? is there anyway i can move to the new home before the closing date? also can anyone recommend a reliable and honest mortgage company that i should use? how much do they usually charge you for closing cost?

thank you so much,
mass2007

m2c · Joined: 03 Aug 2005 Posts: 937

Get a bridge loan on your current home. This will provide the downpayment and closing costs (well, maybe just a portion – it’s MA after all!) plus you don’t count the payment on the current home. Latter may absolve you of paying off the credit card right now.

Should be easy to work out but you didn’t supply any of the income and debt ratio figures. Bridge loans should be fairly easy to get unless MA is in a “dead zone”. Many brokers are sitting on piles of cash as a result of the boom market several years ago and they may prefer parking money in a bridge rather than a lowering yielding money market account.

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

mass2007 wrote: but the problem is, i cannot get a pre-approved unless i have some $20,000 in his account and pay of my $5,000 credit card bill.

I'm confused by that statement. You have to put $20,000 in who's account in order to get a preapproval?

I'm assuming the problem here is that you want to BUY before you SELL so the money you need to buy is in the equity of the home you are going to sell. Do I have that right?

If so, M2C is correct in suggesting a bridge loan. Basically taking out a short term loan using your current home as collateral. The "catch" can sometimes be that while you don't have to qualify from a debt-to-income standpoint using a payment on the bridge loan, you may have to qualify with your new mortgage and your current mortgage payment.

While I know you don't want a double move, it can be to your favor from a financing standpoint to do the buy and the sell on the same day or do the sale first. That way you are able to use the equity and don't have to qualify using both mortgage payments in the equation.

good luck.

m2c · Joined: 03 Aug 2005 Posts: 937

The way bridges are done around here is via a first mortgage on your current home up to a certain loan-to-value – normally around 80% but I’ve seen higher. The bridge pays off the existing first and provides additional funds so purchase of new home. Usually 2 to 6 months of interest on the bridge is collected at closing so that the payment on the bridge will NOT be counted in the debt ratio on the new home. Texas has some unique homestead loans and so I suspect this is why Ken commented ("may") on qualification using both payments. I suspect you don’t have these drawbacks in MA.

Even though the payment on the bridge is not counted in the ratios, you are bearing some risk that the current home won’t sell (close) before the bridge is fully due and payable. In your case you have an existing sales contract to mitigate this risk and your situation should fit into standard FNMA contingent debt underwriting. The standard underwriting can get awkward if there’s a contingency clause in the contract for the purchase of your current home but most lenders do not even require an existing sales contract; just a listing.

Lots of guesses on what your other credit card and auto obligations are but I’d point the LO in the “bridge” direction. If the LO doesn’t have access to bridge loans or is unwilling to carry the bridge, move on to another shop. I can see why a short term rental will not fit your work situation.

mass2007 · Joined: 09 Aug 2007 Posts: 2

ken(TX) wrote: mass2007 wrote: but the problem is, i cannot get a pre-approved unless i have some $20,000 in his account and pay of my $5,000 credit card bill.

I'm confused by that statement. You have to put $20,000 in who's account in order to get a preapproval?

hi i'm sorry for the error, bank said i have to have $20,000 in my bank account, and pay credit card bill in order for me to get pre-approved. i will have that money of course after the sale of the house i am in right now.the closing date will be on sept. 14.... i'm just worried about not having a place to stay with all my stuff and equipment after closing.. i might just consider renting a place while getting pre-approved..

thank you m2c and ken(TX) for the reply, i appreciate it.. i will ask the agent if we can do what you have suggested.

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

Actually, M2C, the reason for my saying "may qualify" isn't due to being in Texas as much as not having done a bridge loan that wasn't a 2nd lien. I'll confess I haven't done a bridge loan in 10 years....and they aren't eligible in Texas....but my last experience was using a bridge 2nd lien product not a first lien product.

m2c · Joined: 03 Aug 2005 Posts: 937

Ah subterfuge! We do them as 1st s. Pay off the existing 1st and advance the difference to 80%. This keeps us clear of those pesky state 2nd mortgage laws which, in my state, requires you to “close” in your “office”. Title companies close all our deals so for those who want to follow the state 2nd mortgage law, you have to establish MANY branch offices in various title companies. More expense and fees!

Yes, I’d prefer to advance just the “new money” but there’s the tap dance with the state code. Ironically we have a subsidiary with a 2nd mortgage license but using two companies would just confuse things and, of course, our LOS put out only one name.

Oh, to be a bank and not worry about state laws!