Buying a Bigger Home in Connecticut?

Posted on November 10, 2016 · Posted in Connecticut Home Purchase Mortgage

Buying Your Second Home?  

Hello everyone, this is John Vecchitto, a local loan officer for North-East Financial in Middletown, CT. There comes a time in every homeowner’s life when they start thinking about upgrading to a bigger home. This is completely normal with young couples starting families of their own or people relocating to be closer for a job.

That is why I wanted to talk to all the seasoned buyers out there today and the importance of getting prequalified. If you own your home and wish to buy another home, most people will sell their home and use the equity as a downpayment for a new home. This is known as a seasoned buyer or a second-time homebuyer. Unlike first-time homebuyers, seasoned buyers can, in most cases, purchase a bigger home than their current home. Additionally, depending on how much equity is in the home and the sale price, seasoned buyers can also obtain a mortgage with no mortgage insurance.

Let me give you an example. Suppose Joe Homebuyer has owned his home for 10 years. He bought the home for $150,000 and owes about $100,000 on his mortgage. Joe would like to upgrade to a bigger home and sells his home for $140,000. Because he owed $100,000 on his mortgage, Joe now has $40,000 to use towards the purchase of a new home. Now let’s say Joe finds a home for $200,000 and uses the $40,000 as a downpayment. Since his downpayment is equal to 20%, Joe could now obtain a conventional loan with no mortgage insurance!

There is one catch to all this. In this particular example, I am assuming Joe meets the qualifications of a conventional loan. This means his credit score is good, he has good income to support the home, etc. This is why it is crucial to get prequalified BEFORE putting your home on the market. The last thing you’ll want to do is go through this whole process and realize you don’t meet the qualifications of a loan product.

It is also important to talk to a professional realtor to get a market analysis on your home. The reason for this is to understand what the value of your home currently is and what you can sell is for. Now you might be wondering, “what if I would like to sell my home but the value has dropped and I’m not able to use the proceeds to purchase another home?” In this particular case, the homebuyer has a couple of options. The first is they could purchase a home using 100% financing with programs like USDA or VA. The second option would be to use the money they have saved either in their bank account or retirement account and purchase the home. For as little as 5% down, seasoned buyers may qualify for conventional financing. The third option would be to purchase a home with a Hubbard Clause. A Hubbard Clause is a contingency to a purchase contract that conditions the buyer’s offer upon their ability to sell and close on another home.

So if you’re currently a homeowner looking and upgrading your current home, call me today to go over all your options. Feel free to send me an email at johnv@northeast-mortgage.com or call me on my cell which is 860-918-0251. If you prefer we can meet in person as well.

johnv_picJohn Vecchitto / Loan Officer
NMLS# 1127163
210 S. Main St. First Floor
Middletown, CT 06457
860-918-0251 (Cell)
860-788-7237 (Office Phone)
johnv@northeast-mortgage.com
Company NMLS 117273

 

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