Profile picture for kathie87124

Buying a new home before existing home sells

My current house is paid for.  I'm downsizing to a smaller house at a lower value that my existing house.  The lender is suspicious that I'm buying the new house as an investment property.  I recently retired.  As an older person, I can't be the only person who wants to downsize.  They want an explanation.  Is this normal?
  • March 18 - Rio Rancho
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Answers (9)

Profile picture for kathie87124
My agent did recommend that I sell my current house before buying a new one.  However, I didn't want to do this.  My house is very nice and will sell quickly.  I wasn't willing to part with it (despite it being too big) until I found a suitable replacement.  I looked at houses for 2 months before I found one I liked.  I didn't want to have to rent an apartment while I searched for a new house.  The loan is just a back up in case my current house doesn't close before I have to close on the new house. 

I will be using the proceeds of the sale of my current house to do some upgrades to the new house ... adding refrigerated air, updating the shower in the master bath and possibly replacing the carpet with wood flooring.  Any excess will go into savings.

The new house is about $30,000 (give or take a few thousand) less than the value of my current house.  I can see why a lender might be suspicious.  My agent plans to provide them with a copy of the listing agreement to show that I am planning to live in the new house. 

I'll be glad when this is over.

Thank you to all of you for your comments.  I really appreciate it.  
  • March 19
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Dear kathie it's that way unfortunately that's why we re command to sell your home first put your money aside then buy the one you want. Since lenders prefer to give loans on primary home.
  • March 19
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Profile picture for JoshBarnettREIB
If you do not "click" with the lender now, you may not click with them later, interview several prior to hiring one, remember, they work for you, not against you. 
  • March 19
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Profile picture for Dan Tabit
Kathie,
Once your home is listed, they will be fine with it.  Lenders have to be suspicious after all the shenanigans of the recent past.  It's not you, it's the industry and an overabundance of caution.  
Once you're listed, send your loan officer a confirmation and you'll probably be fine.  
  • March 18
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Profile picture for kathie87124
I will be putting 20% down (probably more), and I expect to list my current house by Friday (Monday at the latest).  I have a bit more to do, since my cleaning lady went AWOL.  My handyman is coming tomorrow for a few minor things we didn't have time to do last week.
  • March 18
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Profile picture for Dave Salzman Team
Have you listed your current home for sale? Or do you plan on leasing it for the potential income?

Showing your lender the listing contract should give them some comfort that you are planning on downsizing. If your lender is not understanding, perhaps you should shop around for another lender. Since your home is paid for and you plan on buying a less expensive home, I assume you are planning on not using all of your equity on your new home since you are dealing with a lender.
  • March 18
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Profile picture for DanLucente
This is normal. The lender would be suspicious if your purchasing the new home with less than 20% - 25% down. As they're taking more risk they'll want to know what the property will be used for.
  • March 18
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Profile picture for kathie87124

Sorry.  I didn't mean to answer my own question.  I was just thanking the people who responded to my question.

  • March 18
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This is the norm. Usually if your current home is on the market they will move forward with the loan.
  • March 18
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