Need to downsize but can't get mortgage.....should I look into a hard money loan?

[avalonrose]

Anonymous wrote:

Wait? You own your house outright? but you think having a mortgage or renting is going to be more economical? What am I missing?

Maybe they want to downsize so they can use some of the money that is now tied up in the house? I am only guessing here, but it may be that they are in a tight financial situation and selling the 1.1 million house and moving to say a 700K house will give them some money to pocket. They would be paying cash for the downsize house so no mortgage.

Unfortunately you are correct.

[Anonymous]

OP, your best bet is to sell but be upfront that you require a 60-90-day rent back period. Then buy cash. You can start looking as soon as you get an offer. This is not that hard. Don't overthink it.

[Anonymous]

This situation is why we tell people all the time on this site that paying off your house isn’t the amazing financial decision that a lot of people think it is.

[Anonymous]

You are struggling financially with zero mortgage payment but want to buy another house? How is that a good idea?

[Anonymous]

Try to avoid one as much as humanely possible, OP. Due to your suboptimal credit score, they will charge an insane rate. A rent-back of your own home, or renting an apartment, will cost you less.

[Anonymous]

Why can't you sell, rent back your house and then just purchase a smaller home outright?

But yeah, I too wouldn't sell a paid off home. Just the realtor and moving fees and transfer taxes are $$$

[Anonymous]

Are you trying to use house proceeds to pay off another debt? Is it credit cards?

[Anonymous]

Do you have a basement/room you could rent out in your current home?

[avalonrose]

Anonymous wrote:Are you trying to use house proceeds to pay off another debt? Is it credit cards?

It was....but we've paid that off too. We also want to move for other reasons....we don't like our neighborhood, and the floor plan is sub-optimal for our family's needs.

[Anonymous]

You are going to have to make some compromises. You aren’t going to net 1.1 because there are selling costs. Given the other factors you mentioned, you should try to spend way less than 850 on a house. If your overall financial situation improves, you can remodel, add on or move. But in the short term, having the extra cash will be nicer than having the perfect house.

[Anonymous]

avalonrose wrote:See above...I edited my post.
Yes, we own the home outright.
The upkeep on it is getting a little bit much, as it's a large house.
We need to buy a smaller one for about 850, and we intend on making a profit.
But we can't buy a home without selling ours first, because no lender will give us an 850k loan to purchase a new house before we sell the home we're in now due my husband's current income level.
So, I was asking if anyone had done a hard money loan, or some other kind of loan that is determined on the home's equity and not on income.

I feel like I’m through the looking glass with this “we’re having financial problems, we can only afford a $850,000 house” shit

[Anonymous]

avalonrose wrote:

Anonymous wrote:Are you trying to use house proceeds to pay off another debt? Is it credit cards?

It was....but we've paid that off too. We also want to move for other reasons....we don't like our neighborhood, and the floor plan is sub-optimal for our family's needs.

You're going to incur far more in transaction costs than the incremental upkeep savings will provide. And in your situation, "we don't like our neighborhood" is a terrible reason to move.

Abandon this ill-conceived plan, and focus on getting your financial feet under you. When you do, then you can move.

[Anonymous]

I would rent.

[Anonymous]

Don't take hard loan.

Sell the house and rent and yes, I will recommend that despite you need to move twice. Moving an extra time is a hassle but but has the least down side in your situation. Protect your downside. Also, housing prices have started declining so you won't be under any pressur eto quickly get something. You can take your time.

[Anonymous]

OP, here is a summary of your options that I can think of:
1) Hard money loan. It's an option but not a good one since there are origination fees and the interest rate is higher than what a bank would charge.
2) Bridge loan from a bank. This is better than a hard money loan. Less fees and lower interest rate. This is different than a mortgage which I think you were looking at.
3) Sell your house first and rent back. But since you do not know when you will find a house to buy, this is a risky strategy. Maybe do a 6 month rent back.
4) Put in offers with a "home sale contingency" which isn't great because a seller does not like to see contingencies.
5) Try to time the sale of your house and the purchase of your house on the same day. This is very difficult to do but is possible
6) Sell your place with a 60-90 day rent back and if you can't find a place to buy, do a long term AirBnb temporarily for a few months until you can find a house you like.
7) Apply for a HELOC or Home Equity Loan and then use that money to buy a house. You should be able to find a lender to get you 80% of the value of your house which it sounds like your budget is for your new house.

Hope this summary of options helps you!