If you're thinking about selling your home and moving up, do your
homework before offering your home for sale. Read the following story
to see what can happen to home sellers who don't do their math.
A young family sold their home in California, before they determined
how to buy their next house. All they thought about was moving into a
larger home for their growing family.
Two years before, after this young couple purchased their first home,
they bought a minivan with payments and increased their credit card
debt with home furnishings purchases. Then, the wife quit working to
stay home with their baby. The family still had sufficient money to
make all payments on time. They fell in love with a larger new model
home in a nearby tract home development. The sales agent convinced them
the new home would only cost them another $200 per month.
The family had no trouble selling their home. To qualify for the new
home mortgage payment, they had to pay off the minivan, student loans,
and the credit card debt. Out of their home sale proceeds, these
payoffs left less than a 10% down payment for their new home.
Because of their changed income and low down payment, they didn't
qualify for the new home of their choice. With only 5% down, the couple
had to pay higher interest rates on a second to avoid mortgage
insurance. Without the wife's second income, the total payment meant
that they only qualified for a new mortgage for a home which cost less
than the one they sold!
Before you put your home on the market, make sure you can buy the home you want.
Consider the following financial concerns:
Talk to a loan officer and check your credit. Don't get caught after
selling your home, when it's too late, to repair any credit issues. Of
course, you may have a great down payment from the sale of your home,
but other bills like credit card debt, auto loans, and student loans
may need to be paid off so you qualify for the new mortgage payments.
Find out how much of a monthly payment and the down payment amount you'll need to buy the home of your choice.
Do the math. How much can you expect to net from selling your home?
1. Do you have a mortgage prepayment penalty that could eat up a significant amount of your equity?
2. Determine selling commission expenses. Can you sell your home
effectively on your own or do you need to pay 6% of your selling price
for a real estate agent's expertise?
3. Estimate your closing costs. Ask a local closing or escrow company
for an estimated closing cost amount for a home in your price range.
4. How much work does your home need to ready the property for a
top-dollar sale? Which upgrades or redecorating expenses make sense
financially?
Consider all the expenses of selling, determine your actual profit,
match that amount to your down payment, and see how much of a home you
can buy with your qualified monthly payment amount. After you do your
math homework, you'll be ready to think about selling your home. Don't
get caught like this young family and be forced into a lesser home.
Copyright © 2005 Jeanette J. Fisher - All Rights Reserved Worldwide.
