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There are many factors to consider when you decide to purchase a new home—even the second time around. Whether you want to move to a neighborhood you’ve had your eye on or you’re looking to stay within a certain school district, finding the perfect home in today’s market can be a challenge.
Here are a few items to consider before you decide to make the move.
Selling your current home
The biggest difference between buying a first time versus a second is that the buyer already owns a property. This can be a benefit when you have equity in your current home. You can use the property’s value as a down payment for your new home. With the proceeds of your current home, you may also be able to pay off debts that can help you improve your buying power on your loan pre-approval or reduce your terms.
Getting prequalified
Second-time buyers should consider getting prequalified for a loan by a local originator. This way, they can house-hunt with confidence, knowing what they can afford and that there are no outstanding credit issues against them. It’s a good way to set yourself some standards of what you can feasibly afford to purchase before getting attached to a given property.
Buying conditionally
Often a second-time buyer will make an offer on a new home conditional on the sale of an existing home. This prevents the buyer from ending up having to pay a loan on two properties simultaneously, which can be financially crippling. On the other hand, it can also make the new-house offer less appealing. (In most cases, the seller will continue to market the house in the meantime.)
As the seller, if you continue to market your property, you may receive an unconditional offer and could put the original conditional buyer on notice to dispense with the condition of sale of the existing property. In this case, the buyer could apply for a mortgage loan to secure the full purchase price to be able to proceed with the sale without his or her existing property having to be sold.
If you find yourself in this position, we offer bridge loans as an option for you.
Receiving assistance
You may have heard of the South Dakota Housing Development Authority’s First-Time Homebuyer program that provides down-payment and home-lending assistance for first-timers. There is also a similar program built for second-, third- or fourth-time buyers, too, depending on their financial situations. The Repeat Homebuyer program, which is offered through Sioux Falls Federal Credit Union, might be a good option if you meet certain income and residency standards. Talk to a lender to learn more.
Lending for the long-term
Will this new home be your “forever home?” If so, you may want to look into a conventional, fixed-rate mortgage. It’s SFFCU’s most popular mortgage option today, boasting a fixed interest rate for the entire term of the loan and providing the convenience of a monthly payment that doesn’t change. They’re offered in 30-, 20-, 15- and 10-year terms.
With this type of mortgage loan, you can benefit from:
- Consistent monthly payments
- Selection of term options
- Choice of purchase or refinance
- Option to prepay without penalties or fees
Lending for the short-term
But sometimes life throws us curveballs, and we only plan to stay in a home short-term. Or maybe you’re able to pay off your loan in a shorter time than most. An adjustable-rate loan may suit your needs more than a fixed-rate one. A conventional adjustable-rate mortgage has an interest rate that changes during the life of the loan according to movements in an index rate. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month.
With this type of mortgage loan, you can benefit from:
- Low initial rates and payments
- Initial, subsequent and lifetime rate caps
- Choice of purchase or refinance
- Option to prepay without penalties or fees
Lending in other circumstances
Conventional might not fit every occasion, though. Luckily, you have the option to select a variety of other loans depending on your personal history, the type of land you’re purchasing and whether you’ll be building a home yourself. Select from VA, FHA, rural development, first-time homebuyer, lot and constructions loans.
Just remember
If you are on the hunt for your second home, talk with one of our trusted home loan specialists, and get an estimate of how much you can comfortably afford. Then, lock in your low rate as soon as possible.
