Moving up? Where’s that Big Down Payment coming from?

So, you decided it’s time for a change of house, but now for the million-dollar question, where will you get your down payment from? When you bought your first house, you probably had been saving up, stashing away money to come up with the down payment. Maybe you had gift funds from a family member, or you used a first-time buyer grant or other down payment assistance program.  Now that it’s time to move up to another bigger, better home, you need to think about a down payment all over again.  Now I know, you’re probably thinking, well of course the down payment will come from my current home sale, but if that’s the case have you thought about how those logistics will work?  

There is much to think about when planning for a move-up purchase, the biggest of which is the source of a down payment.  For some, you may be lucky enough to have other sources of funds readily available, maybe even a full cash payment, but in most cases that I have dealt with during my 4 decades of being a Realtor, the down payment funds are often tied up in the equity of the current home. That means having to work out the details of the sale of your current home to free up the equity to use as a down payment for the new one. In a slower market you can list your home for sale, then start the buying process while your home sits on the market, making an offer contingent on the sale of your current home when you find the right house to buy.  

But in a fast-moving sellers' market, as we have in San Diego today, contingent offers aren’t typically being accepted and sellers' homes are going under contract at lightning speed, making it tricky if your home sells in a matter of days but you haven’t yet found the right new home to purchase.  Where will you move to if your current home closes before the new one? Now is a good time to get creative in thinking about down payment options.  Talk with your favorite lender or ask me for a referral to a great one! Lenders may have creative options you didn’t even know about, Bridge Loans, Credit Unions that offer Loan Modification options for up to 3 or 6 months after closing, or even borrowing gift funds from a family member (make sure to speak with the lender and follow their instructions regarding any gifted funds so you don’t have an issue with underwriting!), can all offer alternative solutions besides just getting cash from the sale of the current house. 

Do you have other sources of funds besides equity in your current home? A loan from a retirement account? Always consult a CPA or other tax professional to ensure you understand any potential tax implications from this option. Or perhaps a money market or other long-term savings account that you generally don’t touch, but could use for the short term and then refund after the closing of your current home?  Maybe you can get preapproved not contingent on the sale of your current home, borrow funds from another account you already have for the down payment, and then after you get the new home closed you sell the current one and use those funds to reimburse your other savings or investment account. There could be many options out there besides just getting cash directly from your current home equity. No matter what the source of your down payment will be, look into all the logistics of accessing the money ahead of starting to seriously look for a new home, so that when you find that perfect new house you already have a plan of action in place and can move quickly on making an offer!

For more tips or info on move-up selling and buying, feel free to Call or text me at # 858-336-1114. Also, you can check out my YouTube Channel for more videos! Don Pelletier here. Let me know how we can help!