How many mortgages can you have? How to avoid juggling two mortgages
It sounds silly to think you could just end up with two mortgages, but it can be difficult to coordinate buying your new home and selling your current one. This isn't the only scenario where you can have two mortgages, but it's one of the most common.
Buying a home can be a stressful process. Throw in having to time it right with selling your current property and the stress level rises. Should you put an offer on a home before you’ve sold your current property? You likely don’t want to juggle two mortgages if your current property doesn’t sell as quickly as you’d like, but if you wait to sell your property first and you haven’t secured your new home, where will you go?
Stress level: through the roof. Here we’ll help you break down your options and weigh your pros and cons. Just know you’re not alone in this common conundrum, and we can help you make it work.
Can you have two mortgages?
Anyone can have two mortgages if they qualify and can meet your lender's income or collateral standards. However, just because you can afford to two mortgages, that does not always mean you should. Before making this big decision, be sure to talk to a mortgage specialist.
How many mortgages can you have?
It makes sense if after reading that you can have two mortgages as long as you qualify for them both, you wondered how many mortgages you can have. Before you decide to jump into the investment property world, know that your total number of mortgages isn't limited... except when it is. Fannie Mae guidelines recently changed, allowing one person to have up to ten conventionally financed mortgages.
Technically speaking, however, there is no limit. Once you pursue a second or a third mortgage, however, lenders often have increasing requirements around down payment, cash reserves, credit score and other criteria. After all, they want to ensure they will get their investment back.
How to avoid two mortgages: see where you stand
If you want to avoid two mortgages, right off the bat, get a comparative market analysis of your home so you have a clear picture of what to expect. Think worst-case scenario here and know what you’ll do if you have to take an offer that’s less than you hoped for.
To qualify for your new mortgage, your income will have to be high enough so that you don’t push your debt-to-income (DTI) level over the edge. If the second mortgage makes this ratio too high (and you don’t have a contingency stipulation in there), you won’t get approved for your loan.
You’ll also want to get a pre-approval. This can make you a more competitive buyer from the start, as well as solidify the price range of your home search.
If you go the ‘sell it first’ route
You’ll know exactly how much you’re working with when you set out to find your new home and you won’t have to deal with paying two mortgages. If you need the money from the sale of your old home to buy your new home, or you know you can’t afford two mortgages for any length of time, this could be the way to go.
But what if you have to be out of your old home before you find a new one? Ask yourself this: would you consider renting and possibly putting some of your things in storage? This would allow you to take your time while you search for your perfect home. You’ll just want to factor in the cost of moving twice, and any extra storage fees.
If you don’t see yourself renting, there is the option to consider a contingency offer—meaning your offer is dependent on the sale of your home. It sounds ideal, but oftentimes another buyer swoops in with no contingency clause and boom—the sale is theirs. This can be so frustrating because by the time you put an offer on a home, it’s likely you’ve already fallen in love with it, not to mention you’ve already invested time and money into inspections and appraisal fees that won’t be refunded.
If you go the ‘buy it now’ route
You have a couple of options. The first is to sell your home quickly. You’ll want to price it aggressively and leave your emotions at the door. Don’t let your hopes of what you thought you might sell it for when you bought it, or its emotional value, cloud your judgement.
This comes into play with your agent’s staging advice as well. Even though you can’t imagine why anyone wouldn’t be immediately charmed by your eclectic taste, try to listen to their suggestions. It’s hard—this is where you built your life’s memories, but the buyer won’t care. Your agent’s advice isn’t coming from personal taste, it’s coming from research.
The second option is to rent your old home once you move into your new home. You can use the money to cover the mortgage, any homeowner association fees and real estate taxes. This can be a great choice if you have to relocate fast and you’re not sure how long your home will take to sell.
The mortgage-juggle struggle is real
There are pros and cons to both sides, so all you can do is consider which pros outweigh which cons for you and your family. Having a plan in place can make a world of difference. You can get started by talking to one of our loan experts. Time and again they find solutions for their clients with our smooth, transparent loan process. Start uncovering your most harmonious home-selling and buying options today.
U.S. News and World Report: https://loans.usnews.com/can-you-handle-2-mortgages-at-once
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