mortgage qualification when moving up

Without an agreement for purchase and sale on your current residence, you will likely need to qualify for both mortgages.

Talk to your mortgage guy.

We're with RBC. We told him we plan on buying first then selling our house. He told us what we prequalify for and that we can get a bridge loan. Basically we can buy a house and they will give us the 20% downpayment for new house as long as we sell our current house with a firm offer before closing of the new house. So the current house doesn't have to close before the new house close, it just needs to be a firm offer.

For example: we bought new house, closes Sept 1. We listed current house, received firm offer for purchase. Current house has close date of Sept 15.

As your plan is to buy before you even list your current home you will definitely have to qualify for 2 mortgages and have the financial capacity to carry two homes.

Bridge financing is only available when you have a firm offer (all conditions removed) on your current home. Obviously you will need to have the home listed for sale and an offer accepted to qualify for bridge financing. Your goal is to not even list your current home until after you have purchased your new home so you will not qualify for bridge financing.

You don't have to list your current house before buying your new one, we didnt.

We bought a new house (bought it last week), it closes Sept 1st. We haven't even listed our current house yet, it's being fixed for staging and will be listed next week.
Our realtor told us that townhouses like ours sell in a week. So as long as we have a firm offer by Aug 31, we should be good.

kittypink wrote: ↑ You don't have to list your current house before buying your new one, we didnt.

We bought a new house (bought it last week), it closes Sept 1st. We haven't even listed our current house yet, it's being fixed for staging and will be listed next week.
Our realtor told us that townhouses like ours sell in a week. So as long as we have a firm offer by Aug 31, we should be good.

Curious have you been told by the bank you would qualify for 2 mortgages at the same time?
Are you hoping that they will process your bridge financing based on your word alone that you will have a firm sale prior to your closing?

ZxExN wrote: ↑ Curious have you been told by the bank you would qualify for 2 mortgages at the same time?
Are you hoping that they will process your bridge financing based on your word alone that you will have a firm sale prior to your closing?

Yes our mortgage guy at RBC said we prequalify for a $1M home, we bought a house for $850k (not in the GTA), and house closes on Sept 1st. We submitted the paperwork to him last week and it's approved. We have not listed our current house yet, that won't happen till next week. As far as I know, once an offer had been made for our current house, the new offering person has to submit the offer, we have to accept it, and the offering person has to put a deposit. That is considered a firm offer, and we have to send him proof of that, so it's not just our word. There's paperwork and money.

We bought before selling and didn’t have to qualify for two mortgages. We talked to our mortgage broker and had a ballpark number of what we qualified for. Made an offer and it was accepted. Broker submitted our application and made a note that the majority of down payment will come from the sale of our home. Lender didn’t have an issue with that but in order to do the bridge financing, we needed to have our hold sold firm first. We listed and sold, submitted paper work and then secured bridge financing (so we don’t have to close both homes on the same day).

Just a clarification to the above.
I did ask our mortgage guy about buying first and moving completely into the new house, then selling old house, and he said in that situation we do have to qualify for 2 mortgages.

That would have been my ideal, since I hate having people go through my house while I'm living in it, but unfortunately in order to qualify for 2 mortgages, we would have had to buy a $600k house, and there's no houses we liked in that range.

So we ended up buying first, now we're in an Airbnb and will be here for a month while we sell our current house. Not our ideal situation, but we have 2 cats and a dog and we want to get top dollar and it's easier to have a nicer, cleaner and not smelly house if we're not living in it for the sales process.

kittypink wrote: ↑ Yes our mortgage guy at RBC said we prequalify for a $1M home, we bought a house for $850k (not in the GTA), and house closes on Sept 1st. We submitted the paperwork to him last week and it's approved. We have not listed our current house yet, that won't happen till next week. As far as I know, once an offer had been made for our current house, the new offering person has to submit the offer, we have to accept it, and the offering person has to put a deposit. That is considered a firm offer, and we have to send him proof of that, so it's not just our word. There's paperwork and money.

When you say you submitted the paperwork, are you referring to the mortgage disclosure paperwork and the subsequent mortgage application paperwork?

ZxExN wrote: ↑ When you say you submitted the paperwork, are you referring to the mortgage disclosure paperwork and the subsequent mortgage application paperwork?

We sent the Agreement of Purchase and Sale and the MLS listing after purchasing the new house.

Mortgage paperwork for pre-approval was done before we even started looking for a house. This is the paperwork where we had to show finances, pay stubs etc.

kittypink wrote: ↑ Talk to your mortgage guy.

We're with RBC. We told him we plan on buying first then selling our house. He told us what we prequalify for and that we can get a bridge loan. Basically we can buy a house and they will give us the 20% downpayment for new house as long as we sell our current house with a firm offer before closing of the new house. So the current house doesn't have to close before the new house close, it just needs to be a firm offer.

For example: we bought new house, closes Sept 1. We listed current house, received firm offer for purchase. Current house has close date of Sept 15.

Just out of interest, what happens if you're unable to sell by the closing date? Not you specifically, but just in general when let's say it's a buyer's market, not seller's - do you know?

hierophant wrote: ↑ Just out of interest, what happens if you're unable to sell by the closing date? Not you specifically, but just in general when let's say it's a buyer's market, not seller's - do you know?

You can try to renegotiate a delayed closing date, paying the seller their lawyers fee and carrying cost and if the seller says no, you lose the deposit.

Or, you can try to come up with 20% downpayment on your own by the closing date so you don't lose tour deposit.

Jenuine wrote: ↑ We bought before selling and didn’t have to qualify for two mortgages. We talked to our mortgage broker and had a ballpark number of what we qualified for. Made an offer and it was accepted. Broker submitted our application and made a note that the majority of down payment will come from the sale of our home. Lender didn’t have an issue with that but in order to do the bridge financing, we needed to have our hold sold firm first. We listed and sold, submitted paper work and then secured bridge financing (so we don’t have to close both homes on the same day).

What if I don't need any bridge financing for my down payment? Based on other responses, it looks like my current mortgage will still be a factor and I will have to be able to qualify for two mortgages.

aziz93144 wrote: ↑ What if I don't need any bridge financing for my down payment? Based on other responses, it looks like my current mortgage will still be a factor and I will have to be able to qualify for two mortgages.

Do you plan on moving into your new home and then selling your current one? Or do you plan on buying a new home and immediately putting your current home up for sale? If the latter then I’m assuming you plan on closing two homes around the same time. In that case, I don’t see why you’d need to qualify for both mortgages. I don’t know anyone who’s had to qualify for both when buying and selling with closing dates around the same time.

My initial thoughts were to move into a new home and then put up my current one on sale. That's convenient, but I don't know if it is going to work.

aziz93144 wrote: ↑ My initial thoughts were to move into a new home and then put up my current one on sale. That's convenient, but I don't know if it is going to work.

As a former mortgage agent I can tell you that it's not going to work - you will have to qualify for 2 mortgages for the simple fact that there is no guarantee that you will sell your current home after you close on your new home. Any number of things can pop up that prevent you from wanting to sell.

kittypink wrote: ↑ Just a clarification to the above.
I did ask our mortgage guy about buying first and moving completely into the new house, then selling old house, and he said in that situation we do have to qualify for 2 mortgages.
...

This is exactly what the OP wants to do.

Buy first, then sell get bridge financing.

The thing about buying first is you set a floor at what you can get for your 1st home. Basically, if something happens and you get $50K less than expected, are you able to make up the difference? Just be conservative in your estimate of what you'll get for your home. I prefer selling first but understand the amount of problems that can cause (ie: may be out of a home if you can't find a new home but already sold the current one).

Thanks everyone.

Now what does qualifying for 2 mortgages mean? If my current mortgage outstanding is $500K and I need $1M mortgage for my new home, I should qualify for $1.5M. Is that it or does my current monthly payment matter in anyway?