Hello, we are actively looking for a new home in the $400-450k range and have between $70-130k in equity in our current home. Our current lender has us pre-approved for a 5% down mortgage at the high end of our budget and for a 5% down mortgage with a bridge loan.
In theory, we could probably come up with the 5% down plus another 2-3% in closing costs by selling some investments and wiping out our savings but would very much prefer not to sell or touch those investments. I also don’t love the idea of the bridge loan – partially due to the additional cost and partially just because it seems like it would make everything more complicated. A few months ago, I started making significantly more money in a new job so while our savings are now growing $2-3k/month, we just don’t have the down payment we’d like in cash at the moment. The longer it takes to find a house, the better our savings will get.
Based on conversations with our agent, any offers we make would be 5% down and not have any contingencies on the sale of our current home (pre-approvals include both mortgage) in order to hopefully not immediately lose out to better offers. We’d also really prefer to move in to the new house first so we can perform some needed maintenance on our current home before selling. Luckily it has a rental unit that covers about 80% of the mortgage so I’m not too concerned about paying both mortgages for a few months but ultimately we will sell to recognize that equity.
With all that said, I would love to hear anyone’s thoughts on the best way to go about this – partially from a strictly financial standpoint and partially from a convenience/better offer standpoint. Would it make sense to get a home equity loan or line of credit rather than bridge loans in order to have the cash on hand? Last resort, we could probably get a gift from family – I know they would sign the form confirming it was a gift but if we ever went that route I would absolutely want to pay that back after selling our current home so I really don’t want to get into unethical situation with that.
Thanks so much!