Q: I recently sold my house. In this market you would think that would be a good thing, but now I can’t buy the house I wanted because I did not get approved for the next mortgage. And it turns out I have to rent. I am regretful, but how was I supposed to know that would happen?
A: You should have gotten preapproved before putting your home on the market. Then you would have known. I asked Stan Reinford from Bank of America Home Loans if he has run into this problem.
“I recently received a call from a couple who sold their home and wanted to get preapproved to purchase another. Their goal was to downsize,” said Reinford. Why didn’t they get preapproved? “Their response was that they have had NO problems in the past obtaining a mortgage, so they did not fear any problems.”
Well, there were problems. The first problem was the couple had different work situations than the last time they bought. The past mortgages these clients had were “Stated Income/No Documentation” types but those loans don’t exist anymore. The second, was there were prepayment penalties from their home loan, so their net profit was much less.
“Needless to say, I could not help them purchase the home they were looking at,” admitted Reinford. “They will need a co-signer to help them if they still want to buy. The end result is, now they are upset that they have sold their home.”
The moral of the story is, make sure you get preapproved prior to putting your home on the market. This way you can be sure you will be able to meet your goals, have enough proceeds from the sale, your credit is still good and your income is sufficient to get you into the next house.
Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.