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Can you Buy a Home if you Already Own a Home?
Dated: September 30 2019
It's Andrew and Kristen with the Emerald Group.
All right, so this week we decided we were going to talk about - do you need to
sell your own home before financing another one?
Because if you're paying cash, it doesn't really matter, right?
We’re going to skip that portion of let's say you're financed in one home
and you're thinking about purchasing another home.
We actually have some customers going through this right now.
We figured there's some good information there.
What if your current home is a VA loan?
Okay, if your current home is a VA home,
you can still purchase another VA home.
You have four hundred eighty four thousand
three hundred fifty dollars of entitlement for your VA eligibility.
You can still go over that and lenders correct me if the numbers change occasionally changes on us.
So, $484,350 and then anything you go above that you're going to have to pay a down payment on so let's say “Home A” is 200,000.
You'll still have two hundred eighty four thousand three hundred fifty dollars to go up to
your next home without having to worry about it down payment.
So VA is definitely possible to do this.
Now let's talk debt to income ratio.
Do you need to actually close and sell the first home before purchasing the next one. Maybe
Let’s elaborate on that.
Basically what the lender is going to look at is your debt to income ratio.
They will count your mortgage on your first home that you're living in
so that mortgage payment plus the new mortgage payment plus any other debt you have
credit cards, car loans, student loans, all that good stuff.
If all of that equals under a certain percentage of your income,
Then you should be good to continue without have to sell and close on your current home.
So that leads us to kick out Clauses in the contract.
Let’s say you're living in a home now and in the given situation that we're talking about now,
they're fixing up the home,
but they found another home that they just fell in love with they weren't even
really looking at just it just happened that's part of it.
That's part of home shopping.
And we decided to secure that property
and the sellers and Agent on the other end put in a kicked out clause to protect their Sellers.
The kick out clause is basically stating -
Hey, we're going to keep showing the
home as the seller and if an offer comes through
and we want to take it will let the buyer know that secured the property already
In this case the Seller’s are going to give them in this case 72 hours which is kind of typical but you can always change the times, right?
Anywhere from 48 to 72 hours is typical and it’s basically stating - Hey selling your home is not a contingency.
Given the following example - our contract what it stated was hey,
we're buying said home but we need to sell this one first. So, we'll put a closing date of let’s say
two months or three months out. They accepted it.
Now, if a better offer came through they do a kick out and they tell us that
we have to remove that contingency that says this home has to sell.
If your debt to income ratio is good than you’re good to continue.
Which luckily for us because it was then they were able to do both
and they didn't lose a deal now if things weren't able to then they
wouldn't be able to remove that contingency.
They would have lost that house and the sellers would have taken another contract,
right? If our debt to income wasn’t good, we would have lost it.
Before you start trying to figure out paying stuff off
We suggest you talk with a local lender first see
where you're at with your debt-to-income because
you might be paying step up that you won't have to pay off.
All in all – it is very possible to purchase a financed home while you still have financing on your home. We will get into the nitty gritty of other situations over the next few weeks.
Andrew Iremonger started his Real Estate career shortly after leaving the United States Air Force in 2014. The qualities that the military instilled in him carried on in his work ethic. Just a few sho....
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