Home Sellers Warning for Young Families

If you're thinking about selling your home and moving up, do your homework before offering your home for sale. Read the following story to see what can happen to home sellers who don't do their math.

A young family sold their home in California, before they determined how to buy their next house. All they thought about was moving into a larger home for their growing family.

Two years before, after this young couple purchased their first home, they bought a minivan with payments and increased their credit card debt with home furnishings purchases. Then, the wife quit working to stay home with their baby. The family still had sufficient money to make all payments on time. They fell in love with a larger new model home in a nearby tract home development. The sales agent convinced them the new home would only cost them another $200 per month.

The family had no trouble selling their home. To qualify for the new home mortgage payment, they had to pay off the minivan, student loans, and the credit card debt. Out of their home sale proceeds, these payoffs left less than a 10% down payment for their new home.

Because of their changed income and low down payment, they didn't qualify for the new home of their choice. With only 5% down, the couple had to pay higher interest rates on a second to avoid mortgage insurance. Without the wife's second income, the total payment meant that they only qualified for a new mortgage for a home which cost less than the one they sold!

Before you put your home on the market, make sure you can buy the home you want.

Consider the following financial concerns:

Talk to a loan officer and check your credit. Don't get caught after selling your home, when it's too late, to repair any credit issues. Of course, you may have a great down payment from the sale of your home, but other bills like credit card debt, auto loans, and student loans may need to be paid off so you qualify for the new mortgage payments.

Find out how much of a monthly payment and the down payment amount you'll need to buy the home of your choice.

Do the math. How much can you expect to net from selling your home?

1. Do you have a mortgage prepayment penalty that could eat up a significant amount of your equity?

2. Determine selling commission expenses. Can you sell your home effectively on your own or do you need to pay 6% of your selling price for a real estate agent's expertise?

3. Estimate your closing costs. Ask a local closing or escrow company for an estimated closing cost amount for a home in your price range.

4. How much work does your home need to ready the property for a top-dollar sale? Which upgrades or redecorating expenses make sense financially?

Consider all the expenses of selling, determine your actual profit, match that amount to your down payment, and see how much of a home you can buy with your qualified monthly payment amount. After you do your math homework, you'll be ready to think about selling your home. Don't get caught like this young family and be forced into a lesser home.

Jeanette Fisher helps home owners create homes for glorious living and top-dollar sales. She teaches Design Psychology and real estate investing. Jeanette is the author of many books including "Sell Your Home for Top Dollar--Fast!" and "Credit Help! Get the Credit You Need to Buy Real Estate." For more information on Design Psychology, see http://designpsych.com/ Free Design Psychology for Selling Houses report http://sellfast.info/ "Credit Tips for Mortgage Financing" http://recredithelp.com/

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