When I am asked "Can you help me get a mortgage loan to buy a home before selling my current home?", my answer is "Yes, there is a program for that!"
The program incorporates what is called cross-collateralization. Cross-collateralization in mortgages occurs when a lender has two or more pieces of real estate as security for the loan.
This program securitizes both the current primary residence and the property that the borrower wants to purchase.
There are many benefits to being able to cross-collateralize the current home!
One benefit of the program is that it eliminates the possibility of a move up buyer having to possibly rent and move twice (out of their sold home into a rental, and then from a rental into a newly purchased home).
Another benefit of cross-collateralization is being able to write an offer on a new home without a contingency for selling the current home. This benefit is important in a seller's market, such as we have here currently in the San Francisco Bay Area.
A third benefit is being able to market the current home without still living there. Being able to show a home at any time is a marketing advantage. In addition, it eliminates the hassle for the owners of having to leave the property when it is being shown (great for people with children!).
A fourth benefit is being able to minimize the amount of cash needed from savings to close escrow on the new home. Cross-collateralizing unlocks the equity trapped in the current home and makes it available to secure the new home with up to 100% financing!
There are a couple of considerations the program takes into account beyond the normal qualifying process for a mortgage.
One consideration is the value of the current home and the balance of the mortgage(s) on that home.
Another consideration is the amount the current home could be rented for if it were held as a rental property.
There are costs to be considered when choosing to finance with this program.
The loan amount and payment may be higher than what the borrower would like to have for the long-term. However, when the prior home is sold, the loan can be paid down and re-amortized to a lower payment.
Careful consideration, therefore, must be given to the length of time it is expected to take to sell the prior home.
For more information on how this program can work for a property in California - click here.
Would you like to talk to Phil - call or text (650) 222-0386
Phil Caulfield NMLS #386911 has been helping people obtain mortgages since 1985. The views, articles, postings, and information listed at this website are personal and do not necessarily represent the opinion or the position of Cardinal Financial LLC.