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Buy First, Then Sell?

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Posted On: 05/05/2010

QUESTION

Our house is assessed at $126,000 and is in a great neighborhood. We don’t have the 20 percent down required for most mortgages, and contingency offers aren’t very attractive to sellers. Is it possible to purchase a new place first and then sell our current home?

ANSWER

First, you don’t need 20 percent down to buy real estate. You can get FHA financing with 3.5 percent down plus closing costs as of this writing. Speak with a real estate broker or lender for details.

Second, in an ideal world, you would like to have simultaneous closings going from the settlement of your current home to the settlement of the replacement property. In reality, this is not common and cash from the first closing may not be instantly available. (This is a so-called “dry” settlement; with a “wet” settlement, your money would be immediately available.)

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One solution is to sell the current property -- but with the understanding that you can stay in the home after closing until you’re able to move into the replacement property. You’ll need a “post-settlement” occupancy agreement with the new owner of your property. You’ll have to pay rent for the time you occupy the property after closing, and there will likely be a time limit, say 30 or 60 days. For specifics, speak with local real estate brokers or a local attorney or legal clinic that handles real estate matters.

Third, an “assessed” value is likely to differ from current market price. Ask brokers about current market values.

QUESTION

Has there been any progress toward licensing mortgage loan officers?

ANSWER

Yes. Bill Matthews, president and CEO of the State Regulatory Registry, tells us that as of February, 45 states and territories and more than 67,000 loan officers have enrolled in the Nationwide Mortgage Licensing System. It’s expected that all states will be part of the system by the end of the year, which should cut down on mortgage fraud.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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