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Mortgage Options When Owning Two California Homes at Once

Allison Beatty
LoanBiz Columnist

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In many popular California real estate markets, home sellers will not accept contracts with a contingency for selling a home first, thereby prompting home buyers to struggle with challenging financial issues. Fortunately, lenders have developed financing options to help homeowners in transition.

Five Financing Options

Here's how to maneuver through mortgage loan financing in this scenario.
  1. Seek Mortgage Financing First. Before submitting an offer without a mortgage loan contingency, talk with several California mortgage lenders. Otherwise you may find yourself on the hook for that new mortgage - and run the risk of losing your deposit or earnest money if you fail to get financing.
  2. Home Equity Loans. One way to gather down payment funds is by taking money from a home equity line of credit on your current home. (It is wise to open it before putting your home on the market, as many lenders will not open it after). These funds often do not cover the full purchase price, however, making a "bridge" loan a good option.
  3. "Bridge" Loan for New Mortgage. Bridge loans have become more popular in California, as many home buyers are forced to buy other homes before selling their existing home. You are borrowing equity from your existing home in the form of a "bridge" loan and then paying it back when you sell.
  4. Mortgage Debt Redefined. When taking out a bridge loan, lenders realize that the loan is temporary and will not count that debt toward your new mortgage obligation. While bridge loans can be valuable tools, they often carry a higher interest rate.
  5. New Loan for New Home. Another way to finance the new home is by taking out a loan for the full amount. This can be trickier to accomplish, however, unless you have the income to carry both mortgages. There are mortgages available for more than 100 percent of the home purchase price, giving you access to extra funds for closing costs.

Get Creative with Your Mortgage Loan

There are many mortgage loans to help you finance tricky situations. As you talk with lenders, get all the details about interest rates, loan approval limits and fees before selecting financing for the new home. You'll then be fully prepared to take the next step.

Source
RealEstateABC.com

About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing home improvement columns for 15 years.

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