Here are a few common questions I am asked by buyers I work with in West Seattle, and it doesn’t matter if they are interested in a condo on Alki Beach or a single family home in Fauntleroy.
How much home can I afford?
This is always one of the first questions buyers have and it one that should be answered really before they start looking at homes. Most buyers have a general idea what they can afford in terms of a monthly payment, but what does that really mean regarding the asking price of a new construction townhouse in North Admiral or a resale in Gatewood?
My advice is to always start the home buying process talking to a mortgage lender (assuming that you are not paying cash or have a rich relative who is willing to loan you money for nothing.) If you have a preferred lender great, if not I’d be happy to refer you to some that I think do a great job. Home affordability will vary on a lot of things - including income, the amount you have to put down on a home, your credit score, the type of loan program that works best for you, as well as the current interest rate for loan.
At the moment, interest rates are near historic lows but if rates rise even a small difference can make a large impact on the amount you can borrow. A good rule of thumb to remember: a 1% climb in interest rate will reduce your borrowing power by roughly 10%. For example - if you could afford to borrow $400,000 at 3% you probably would only be able to borrow $360,000 if the rate jumped to 4% as the monthly payment would be about the same.
Can I buy a home and sell my current one at the same time?
Yes. In a traditional sense this question was really about “how do I carry two mortgages at once if I can’t sell my current home immediately while I’m purchasing at new one?” Mortgage lenders have special loan programs do just that. Contact your preferred lender for details.
You can also make an offer on a new home with a contingency that you sell your current home within an agreed upon timeframe. If you fail to do so the agreement is terminated. The risk with this type of offer is that the seller usually has the right to continue marketing the home and if they find another acceptable offer they can ask that either one of two things happen; you remove your contingency to sell your home and close on the purchase or back out the transaction so they can move forward with the second offer. If you remove your contingency to sell and move forward to close you can still sell your current home you just will not be able to use it as option to back-out of the transaction should you have a problem selling.
In today’s fast paced seller’s market here in Seattle, sellers are often receiving multiple offers and in addition to looking for the best offer price a seller typically wants to reduce their risk as much as possible and will likely accept a low risk offer. A contingency on the sale of your current home is a risk to the seller. So how do you get around that? In this market, my advice is to sell your current home first so that is doesn't become part of the deal on your purchase to start with. You may have to move into a temporary housing situation, stay with a relative, or ask the buyer of your current home to allow you to rent-back your home until you secure a new home. The rent-back is something you can negotiate at the time you sell your home. Sometimes buyers will offer free rent just to make the deal work.
Check back soon to find my advice on these questions too:
1. How many homes should I preview before making an offer?
2. What do you think the seller will accept as a fair price for the home?
3. How quickly can the transaction close?
4. How do I know if the home is in good condition? Should I have a home inspection?
5. When can I back out if I change my mind about purchasing?
I you have a real estate question of your own please email or call me anytime. I’m happy to help in anyway that I can.
David Warren
Metropolist
425-760-8285
david @ metropolistgroup.com