Second Home Purchase, EVERYTHING You Need to Know - YouTube

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• i get asked this question all the time from past clients hey chris we bought a house a couple years ago and i think we're ready to buy something else how do we go about doing that this is a super important question because when you sell your first home to buy your second home or your next home there are a couple more moving parts but this is actually good news and an advantage for you because you probably have even more options going forward than you did when you initially purchased my name is chris o'connell i'm a mortgage loan originator 00:30 in minneapolis and what we're talking about today is selling your current home in order to buy your next home or your second home at the same time specifically what you need to know from a mortgage standpoint in order to qualify for your next purchase yes you can sell your current home and use those proceeds or the profit from the sale in order to put down on your next home purchase at the same time you can essentially put your house on the market get a purchase contract from a buyer for your house go out find your 01:04 house to buy get a purchase agreement to buy your house and close on both of those transactions on the same day the title company that you use and your buyer and seller use are the ones that actually handle all the money involved in these transactions so you don't have to do any of that yourself or take care of any of that yourself the title companies deal with that you come in and sign the paperwork for the purchase and the sale and the title companies handle all the money movement between all parties the title company that you work 01:34 with handles all the funds and applies your sale proceeds to the new purchase so you don't have to handle any of that when i say sale proceeds i'm really talking about the equity that you have in your house and equity is the difference between what your house is worth and what you owe on it and typically you're going to have a little bit of equity in your property after a few years so let's just say that you have a mortgage balance of a hundred and fifty thousand dollars the house is actually worth two hundred thousand 02:02 dollars you have fifty thousand dollars worth of equity that equity can essentially be used to put down on the next house of course there are realtor fees and closing costs when you sell and buy a house so we're going to keep it simple and just know that the equity is the difference between what you owe and what the house is worth and when we talk about using the sale proceeds or the profit from your sale in order to put down on the next house you don't need to use all of your sales proceeds to put down on the next house you can put as 02:31 little as three percent down on your next purchase but you can put as much of those proceeds down as you want but you don't need to use all of your sales proceeds one thing i get asked about the profits or the sale proceeds is whether those proceeds or profit is going to be taxed and what i can tell you is the short answer is no the profit or proceeds won't be taxed if you've lived in that house as your primary residence for two years however i would strongly encourage you to talk to a cpa if you do 02:59 have tax questions because i am not a tax advisor the next thing you should know is that even if you are a repeat buyer step up buyer buying your next home or second home you still do need to get pre-approved by a lender before you start looking at homes and making offers on homes many people that i've worked with have since gained equity in their homes equity again being the difference between what your house is worth and what you owe on it and hopefully you've also built up your credit over the last 03:26 couple years by making on-time payments to your mortgage maybe you're making a little bit more money and you're probably in a overall better situation now than when you were when you purchased your first home and your mortgage pre-approval is still going to be based on things like employment history credit income and assets or proceeds from the sale of your home and a big advantage for you as a step up buyer move up buyer or buying your next home using sale proceeds from your first home and a big reason for your 03:56 pre-approval now is looking at the sale proceeds estimates and determining what the best use of those funds are you might be looking at how much to put down of course but you might also be looking at paying off some debt with those proceeds maybe just saving some of the proceeds for your rainy day fund or deciding where you want your new monthly payment to be based on the down payment loan program etc speaking of loan programs did you know that even though you're not a first time home buyer anymore you still have access to some of 04:28 these same great programs for instance if you only have one other finance property which would be the one that you're selling assuming that you have a mortgage against it you can actually still qualify for a first-time homebuyer program and put as little as three percent down on your next purchase assuming you are under the area median income limits i've put a link to the fannie mae and freddie mac income eligibility map which shows the area median income in your area and you have to be under 80 percent of this number if 04:58 you want to use these programs going forward or maybe you purchased a home before you're married now you're married and your spouse is a first time home buyer they would have access to the same first first-time homebuyer programs as well either way you don't need 20 down for your next home purchase that's not a requirement for your first home purchase either it's only a requirement if you're buying an investment property that's when you need at least 20 percent down many people think that you can't use an 05:26 fha loan a second time but that's actually not true either if you have an fha loan on your current home and you're selling that home and you want to use another fha loan again you can do that the benefit of using fha again might be that you could put as little as three and a half percent down on a one to four unit property this might be useful if you are somebody with a lower credit score or a higher debt ratio whether using an fha loan again is in your best interest or not is determined by your situation and that's something 05:58 that you would want to talk through with your mortgage loan originator when you do your pre-approval the mortgage program that you use will be an important factor going forward because you are most likely going to be competing with other buyers the more money you're putting down makes you look better to sellers and the higher you can go on the purchase price the less competition you're gonna face something that's going to help going forward are the new conforming loan limits the max loan limit on a regular 06:25 traditional loan fannie mae freddie mac type loan is 647 200 this is a big increase from previous years and it helps because if you want to go into that higher price range you don't have to qualify for a harder to get or more stringent loan product like a jumbo loan so now you can actually go up to a 660 thousand dollar purchase price putting only three percent down or about twenty thousand dollars down or up to a seven hundred nineteen thousand dollar purchase price putting only ten percent down you're most likely not 07:01 going to be competing with first time home buyers at those price ranges and in general the higher the price the less competition you're going to face you might think that purchasing at those higher price ranges might imply that your mortgage payment is going to be much more than you're used to however you might be surprised if you're rolling over a good amount of that equity from the sale or you're putting a larger down payment like 20 percent down you're not paying mortgage insurance and your rate 07:29 may be comparable now to what it was two three or even four years ago your payment probably will be higher but only nominally compared to where you were before so given the fact that you might be a stronger buyer now with better credit higher down payment a similar rate your mortgage payment on the new house might not be all that much higher and hopefully it's worth it given the fact that you're buying a new home it's got more space to fit your needs maybe it's in a better area it just kind of 07:57 depends on what your situation is regardless it just depends on what you're comfortable with and that's why it's so important to talk and plan ahead with your mortgage lender it's also really important to talk to a trusted realtor who can accurately tell you what your house would actually sell for in this market the purpose of this channel is to help you better prepare to buy your first home or your next home so please subscribe to the channel and hit that bell for updates so you're notified 08:24 when new videos come out because we're going to be talking about everything mortgage and real estate related on this channel if you have a question please leave them in the comments or reach out to me directly if you want to get your pre-approval started today i have an online application link in the description as well as my websites and social media links as well so feel free to reach out anytime Made with ❤️ by Glasp