Question for the lenders: my wife and I are looking to sell our first home and purchase a bigger home this spring. We are looking at possibly trying to sell and buy at the same time with a contingent offer, not yet sold on this though.

We plan on using the proceeds from selling our house towards the down payment on the new house as well as paying off some student loan debt to make the larger mortgage payment easier to handle. My question is how is this handled during the pre-approval process knowing there are debt payments that will go away by the time we close on the new house, or is this a non issue all together? Sorry if this is confusing... but thanks for the help

If the debt to income ratio requires these debts to be paid to be approved, you would have to pay them off on the closing disclosure. No problem. If you do not have to pay them off to qualify, you can pay them off whenever you like.

Just FYI but a contingent offer really decreases your buying power and pool of potential properties. I always tell my clients to make sure that your home is at least on the market before making a contingent offer in order to make your offer more attractive.

Thanks. When getting pre approved Does the DTI calculation include my current mortgage as well as what I could afford for a new mortgage or am I looking at this the wrong way? It's been some time since I last went through the process so I'm trying to remember it.

Davis beat me too it. You are probably not getting a contract on contingency. Cannot say 100% that but I have not seen one in a while.

Your best bet is to get approved holding both mortgages if you can. then depending on your situation you can put 5% down if conventional (loan max 510K) and buying the loan down later. Or you could look at a bridge loan on the old house to use for down payment.

But you want to review all your financial options with a mortgage person to see what you can and cannot do.

My wife and I are in the exact same situation minus the student loans. All proceeds from current house will go into next house.

Any lenders on the forum? I'd like to hear from you. Johndeere5205 @ yahoo . com

Email sent

Adding on to Davis and Bott.

We did the contingent offer song and dance last spring with zero luck in Round Rock. Wanted to use proceeds from condo at the time on new house. Carrying both was too tight for comfort and borderline on the DTI end for what we were looking at anyways. Eventually ended up selling in May with a lease back and closing on new house in July. Even with our Realtor stressing that we were prepped and ready to list/sell ASAP and noting neighboring units were under contract in a day or two, contingent was a no go even with our offers above list.

Just my $0.02 to help keep expectations in check if you try contingent. Even in the 350-450 range we were battling cash offers, so our contingent had zero chance.

I believe going the contingency route depends on your local market. In BCS, we are have shifted to a buyer's market and therefore we have dozens of properties under contingency contracts.

Exactly. If a contingent offer is viable or not is market dependent as well as actual property dependent. If the house has been on the market for 6 months the seller might be open to contingent offer (or might be totally unreasonable who knows). If the house has been on the market for a weekend in a sellers market they are not at likely to take a contingent offer and a bridge loan might be the best bet.

He is in Austin

Understand OP is, but not everyone reading the thread is in Austin.

True but Bill is the first realtor in years I've seen state a contingency offer worth their time. It has not been that way in years in BCS

I did a contingent deal for some clients in Katy not too long ago. As has been mentioned, it really just depends on the individual market. This couple had moved out and the Summer buying season was drawing to a close, so they went with it. All you can do is ask.

Also, with a contingency offer doesn't it make a big difference if you are purchasing new construction from a builder as opposed to purchasing from a private buyer? I'd imagine many (or most) builders are pretty amenable to contingency offers.

Correct. Builders are (usually) much more accommodating as far as contingencies. They just want to get you to sign a contract.

Yep but they also have a decent chunk of your money to keep as a fall back