Two things can be true when it comes to moving.
On one hand, it’s an exciting opportunity for a fresh start, a change of scenery, and a chance to live in a house that’s a little more “you.”
On the other hand, it can be stressful when you consider all the logistics:
- “What will my new mortgage payment be? Can I afford it?”
- “What happens if I sell my old house before my new house is move-in ready?
- “Who’s going to help me move?”
AHHH!
Don’t sweat it.
Whether you’re moving down the block or across the country, here are 8 tips to prepare you for a smooth experience.
1. Time it out.
Establish a timeframe for your move.
According to Mike Mattila, a Home Lending Officer in Marquette, the process for securing a mortgage (e.g., choosing a lender, realtor, getting financials in order, etc.) should generally begin “about three months” before your ideal move-in date.
“Ninety days out is a good time to consider who you’re going to work with and what the process will look like,” Mattila said. “The more you can prepare, the better.”
Mattila added that once your lender runs your credit report, it’s good for 120 days.
2. Pick your partner(s).
Next, choose your lender and realtor.
If you’re staying in the same area, perhaps you’ll stick with the same lender and agent you worked with previously.
If you’re relocating to a new city, Mattila advises researching to find trustworthy local experts.
“Look at Google reviews to find a local lender, bank, and a real estate agent,” Mattila said. “Working with a local realtor and lender who know the area and market is essential.
“Your local lender should help with the financing and be your go-to guide if you’re moving to a new area. They can help answer questions about where to get groceries, where to take your dog, who to contact to change utilities, things like that.”
3. Get pre-approved.
Just as when you bought your first home, you’ll need a lender’s pre-approval to be considered a serious buyer.
“Even if you already own a home, you need a firm pre-approval letter if you want your offer to be considered,” Mattila said.
4. Establish a contingency plan.
If you’re like many homeowners, you’ll need the equity from your current home to make a down payment on your next home.
This is where it can get tricky. Where are you supposed to live if you sell your home before closing on a new one?
You could consider living with friends or family temporarily and keeping your household items in storage. Another option is to negotiate the close date to one that aligns with the closing on your next house.
Your lender will be your guiding light in this process.
Now, what if you buy first, then sell?
You could pay a second mortgage until you’ve sold. If that’s not in the cards, you may negotiate a contract contingency – a deal that’s contingent on selling your current home.
Another option is a bridge loan. With a bridge, you can borrow money for a down payment while waiting for your home’s sale.
“This is where working with an experienced lender helps greatly,” Mattila said. “Your mortgage lender should be more of a financial advisor, per se, not just worried about the mortgage transaction, but putting you in the best possible situation.”
5. Prep your home to maximize its value.
Is your current home ready to be sold, or does it need a fresh coat of paint for better curb appeal, or perhaps more significant repairs like fixing a crack in the foundation?
What renovations are truly essential when it comes to getting the most value from your home?
“Ask your realtor, ‘Hey, I’m going to be listing my house. What do you think?’” Mattila said. “They should be able to give you an idea of what you can net from the sale of it because that will impact your ability to buy.”
6. Know your numbers.
Speaking of “net from the sale” or “net proceeds,” here’s a basic formula to determine an estimate:
Sale price of the home – mortgage payoff amount – costs = net proceeds.
For example:
- Home sale price: $250,000
- Mortgage payoff amount: $100,000
- Commissions paid (agent fees): $15,000
- Cost spent on staging/repairs/improvements: $2,000
- Closing costs: $5,000
$250,000 – ($100,000 + $15,000 + $2,000 + $5,000) = $128,000
In this example, your home sale proceeds are $128,000.
This is an estimate of how much you may be able to use for a down payment on your new home. Know that factors such as capital gains tax and other miscellaneous costs may apply. Your lender and realtor will help you determine this number.
7. Cash (on hand) is key.
Mattila said he often sees homebuyers wanting to put the entirety of their net proceeds on the down payment. While admirable, consider using some of your proceeds to pay off other debts (e.g., credit card balance) to better your financial situation.
According to Mattila, some loan programs only require second-home buyers to put 5% down when purchasing a house. However, they’ll still need 20% down to avoid paying Private Mortgage Insurance.
Also, evaluate your liquidity situation and what you may need on hand for move-in and miscellaneous expenses.
“You have to buy groceries, toilet paper, laundry soap, the essentials … I think people often underestimate that cost,” Mattila said. “Make sure you have some (cash) reserve to handle the unforeseen. I always try to tell people to have $3,000-$4,000 left over. Things can happen.”
Be sure to factor these potential costs with your move as well:
- Moving equipment, supplies, and service
- Moving insurance
- Travel and lodging
- Cleaning services
- Storage
- Furniture and appliances
8. Get move-in ready.
You’re at the finish line!
Here are a few things you may want to handle before you move in or early in your process:
- Connect the utilities
- Change your address
- Establish an internet and TV provider
- Change the locks
- Set up security
- Meet your neighbors
Enjoy your new home! And remember, if you have questions, our incredible team of mortgage experts is always here for you.
“Experience matters; accessibility matters,” Mattila said. “We’re big enough to have all the tools to help you, but small enough to give you that personalized attention when you need it.”
Ready to take the next step toward buying a new home?
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