s/o Down Payment Strategy

[jwright]

I'm helping my mother in law investigate selling her home and purchase a new one.  

Her existing home is the home she and her late husband purchased in 1989 when they moved to the area; now she is 74 and lives there alone.  It is past time to downsize.  Unfortunately, this is the worst time to downsize as the prices have risen and the delta between the sales price of the family home and an updated but smaller home is not going to be much.  

She doesn't have any debt on her house so the ideal situation would be to sell the house and use the proceeds to purchase the new home with the two closings scheduled such that she will be able to just transfer the funds to the second transaction.  The problem is accessing funds for the purchase down payment as well as maybe having to full on purchase the new house without yet having the sale closing proceeds.  We met with a Realtor who told us the  average time on the market before contract in her neighborhood is 5.8 days.  

She doesn't want to pull from her retirement principal for the down payment.  As far as I know, she could get a HELOC on the existing home or a bridge loan(?) and pay off at closing.  However, she wants to buy the new house in cash and not keep a mortgage on the new property.  Short of being approved for HELOC that would cover the entire purchase price; what are the options?

Do lenders typically allow for a mortgage to be paid off completely within just a few months? I'd hate her to pay closing costs on the HELOC and the permanent mortgage when she only needs the money for about 60 days. 

Help me think this through!  Thanks in advance!

[jinkies]

I'm not an expert, at all, but maybe she could ask her buyers for a rent-back option?

Or if they really expect her home to sell in less than a week, she could try to schedule both closings for the same day or within a few days of each other.

We closed on both our old house and new house on the same day. It was a long time ago, but I think we got a cashier's check for the cost of our old house. Them we either stopped at the bank in between? Or maybe we just signed the check over somehow during the closing on our new house? I can ask H if he remembers.



Eta; maybe I'm not understanding. Other than earnest money, would she need to provide a downpayment prior to closing?

[jwright]

Jul 7, 2021 17:51:50 GMT -5 jinkies said:

I'm not an expert, at all, but maybe she could ask her buyers for a rent-back option?

Or if they really expect her home to sell in less than a week, she could try to schedule both closings for the same day or within a few days of each other.

We closed on both our old house and new house on the same day. It was a long time ago, but I think we got a cashier's check for the cost of our old house. Them we either stopped at the bank in between? Or maybe we just signed the check over somehow during the closing on our new house? I can ask H if he remembers.



Eta; maybe I'm not understanding. Other than earnest money, would she need to provide a downpayment prior to closing?

Re-reading, I don't think I explained my concern well at all.  Maybe it's not actually that much of an issue and I'm just confused myself.   

The house she hopes to buy is more rare than the house she is selling.  She also doesn't want to temporarily rent and deal with storage.  So we are assuming she needs to initiate the purchase transaction first; and then hopefully the timing on the sale will work out that once she enters into that contract.  But what I'm anticipating is that she's going to finally find something, go under contract, then getting the house fully ready to sell is going to take time and then she has to deal with showings and the timeline of her buyers.  

I don't know how she can make the purchase without accessing funds from the sale of the house if she doesn't want a mortgage.   I think the options are HELOC for entire amount of the purchase price or liquidating retirement funds.  The long shot would be making a down payment with the HELOC, actually getting a mortgage and then paying off the mortgage after the closing.

[mlkgls]

Is it possible for her to sell first and stay with you or family temporarily? I realize this is not ideal for everyone, but we stayed with my MIL between selling and buying and other than having to store furniture it was so much less stressful. My parents are also considering moving here from about 4 hours away and that is the likely scenario again. 

[jwright]

Jul 7, 2021 18:45:40 GMT -5 mlkgls said:

Is it possible for her to sell first and stay with you or family temporarily? I realize this is not ideal for everyone, but we stayed with my MIL between selling and buying and other than having to store furniture it was so much less stressful. My parents are also considering moving here from about 4 hours away and that is the likely scenario again. 

Hahahaha; my husband would not last two hours with her in his safe space.  

[ellipses84]

I’d recommend a rent back. They are really common right now since it’s a sellers market and sales are happening so quickly. You’d probably need to set a timeline on it, like 3-4 months but sometimes that’s ideal for buyers who are currently renting with a lease that is not up or they’d be willing to consider extending it a little more if needed.

She may also be able to do a contingent sale, but that may deter some buyers and has a risk of falling through (like if a pre-approved buyer gets laid off their job before underwriting on the loan occurs).

Nobody wants to move twice, but I suggest she crunch the numbers if it comes down to needing a new mortgage for a new house. I think saving $$$ fees would be worth the hassle of moving twice. There a lot of moving options, including Pods, who will store it so you are only packing up once and unpacking once. She should start purging and getting the house ready now.

[jinkies]

Can you make sure that her current home is sale-ready before she starts actively looking for her new home? That way she is ready to list as soon as she finds her new place. That should help her coordinate the closings to be close to one another.

[mlkgls]

Jul 7, 2021 18:55:38 GMT -5 jwright said:

Jul 7, 2021 18:45:40 GMT -5 mlkgls said:

Is it possible for her to sell first and stay with you or family temporarily? I realize this is not ideal for everyone, but we stayed with my MIL between selling and buying and other than having to store furniture it was so much less stressful. My parents are also considering moving here from about 4 hours away and that is the likely scenario again. 

Hahahaha; my husband would not last two hours with her in his safe space.  

Lol. I have a unicorn MIL who I adore, but I know not everyone feels quite the same way. 😂

[lizlemon19]

You can have the money wired from the sale of her existing house. If you can’t do closings the same day, you could do her house first- get those storage pods that can be moved- then move them to the new house. My mother did that..she stayed in a hotel a few nights.

[steamboat185]

There are a variety of companies here that will buy your house and will allow you to stay in the house for several days for free or longer by renting. You can also pick your closing date up to 90 days out to give her time to find a house and make and offer like a cash buyer. We’ve never used them, but it seems like a pretty decent option (just check the fees).