Considering that my wife and I are currently going through the process of selling our home, there have been a few surprises to me that I think first-time home sellers should know.
While some of this information might be knowledge to some, I think this could serve as a great guide for anybody looking to SELL their first home.
1. Get Pre-Approved
My wife and I thoroughly enjoy looking at houses, so the first thing we did when we decided to sell our first home was start looking at all of the homes we could buy.
We even started getting our house ready to list by cleaning, selling stuff, and having an agent come over. However, looking back I realized all of that would have been a waste of time if we weren’t able to get approved to buy a new home!
So, before you get too excited about moving and looking for new places, take a few minutes and contact a mortgage lender. Find out if you’re pre-approved and also find out how much they’re willing to lend to you.
1a. Find Out How Much Equity You Have
This is especially important in the aftermath of 2008. Many people are underwater in their homes (meaning they owe more than it’s worth), so one of the first steps you should take is finding out how much you owe on your mortgage AND how much your home could possibly sell for.
Knowing how much equity you have in your home is extremely important for a myriad of reasons:
2. Know That You’re Going to Have to put 5% Down
Ideally you’ll put a larger amount of money down on your next home, but for a minimum you need to plan on putting 5% down.
For us the majority of this money has been set aside and we can pay it out-of-pocket, however we’re hoping to make enough on selling our first home (after paying realtor’s fees and closing costs) to cover the majority of the down payment.
3. If You’re Self-Employed or 100% Commission, It’s Tough to get Pre-Approved
This certainly won’t be an issue for many and I knew this before we decided to sell our first home, but if you’re 100% commission (or if you own your own company) then the mortgage lender typically won’t count your income UNLESS you’ve had a commission history of at least 2 years.
Unfortunately for me, I’ve only been 100% commission for 5 months so NONE of my income can be counted. With that in mind, we had to get pre-approved based on my wife’s income and credit score alone.
4. A New Job Probably Won’t Affect Your Ability to get Pre-Approved
Knowing that my income wouldn’t count, we were extremely concerned with our ability to get pre-approved because my wife just changed jobs a few weeks ago!
After talking to the mortgage consultant they informed me that it wouldn’t be an issue. As long as you’re able to show that you work full-time (via 2 complete pay stubs) AND the mortgage company is able to call your employer to confirm you work full-time, then you shouldn’t have any issues.
5. You Can’t Buy a Foreclosure
Well, you CAN buy a foreclosure if:
We’re not in a position to carry two mortgages (well, we could if we wanted but we don’t) and we found out that you can’t really put submit an offer on a foreclosure unless your first house is SOLD!
We discovered that there is a slim chance you can put in a contingent offer but it’s highly unlikely.
With that said, our only chance to buy a foreclosure is to sell our house first, and find a place to live for a few months while we’re looking for foreclosures to buy. With our enormous dog and due to a few other reasons we decided that this really wasn’t in the cards for us.
6. Contingent Offers are Unlikely
Even if you decide to buy a regular house (one that isn’t in a short sale position or one that has been foreclosed on), it’s still unlikely that the seller of the house you’re looking at will accept an offer ‘contingent’ on your house selling.
So, if you put your house on the market tomorrow it’s unlikely that you’ll be able to put an offer on a house until you have a contract on yours.
Of course this will depend on the market that you live in. Right now houses are selling like crazy in the area that we’re looking to move to, so the sellers aren’t inclined to accept contingent contracts when there are buyers that are ready-and-willing to close immediately.
However, if you’re in a slow market it’s much more likely that you can place a contingency offer.
7. Don’t Waste Your Time Looking, Yet
It’s not a bad idea to start looking at a few houses (online) that are in your price range so you can get a sense of what type of house you’ll be able to buy with your budget.
However, I’d encourage you not to waste too much time doing this. The problem we encountered was that my wife and I found a few houses that we LOVED…we had gotten our hopes up and two weeks later, before our house was even listed those houses were gone.
Take things one step at a time. Focus on getting pre-approved and getting an idea of how much your house is worth and how much you owe.
Then, get your house ready to sell (which I will talk about in an upcoming post), and once it’s listed then it will be time to start looking at homes for you to buy.
The articles are written by personal finance enthusiasts (not certified professionals) based on their personal experience. What works for them may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
In accordance with FTC guidelines, we disclose that we have a financial relationship with companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.
Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.