Thinking about making a few changes

[HereIam2011]

I'm looking for advice to decide if this is a good idea or something I shouldn't bother with. Hopefully someone on here has done this or something similar. I have a home right now that I'm making my monthly mortgage payments for. I've been building up equity in the home and paying off extra each month. My question is - Has anyone sold a home and moved into a condo/smaller home and paid cash from the sale of the last home? Basically I would get a condo for 1/3 of the price of my home and only have condo fees and basics to pay for each month. My job will be moving to a different city in about 3?-5? years and I would either sell my current home, rent my current home or buy this condo and then rent that out for mostly profit. I plan on buying in the new city (after renting for a bit) and would like to not have any loans out in my name so I could qualify for a home in a good area. I'm just concerned that I wouldn't get approved if I was trying to buy another home with this one still in my name. Even with it rented...

I hope I made sense!

[JoshuaHeckathorn]

I have a rental property (condo) and I recently spoke with a home lender about buying a new place. I was concerned about the same thing you are - getting approved for financing even though I have the condo rented out. What they told me was if there is at least 30% equity in the rental property and a signed lease, they will count 70% of my monthly rental income when calculating DTI. I think that's fairly common among mortgage lenders these days. Anyway, run the numbers and see where you would stand.

If you think your house will appreciate in the next 3-5 years, why not stay put and plan on renting it out or selling when the time comes to move? A lot could change in 3-5 years! I don't know where you live, but it's not a great time to sell in most parts of the country anyway. That said, if you can live comfortably in the smaller place and feel you could get a decent price for your current home and a great price on the condo, then there's nothing wrong with downsizing and getting out of debt completely. It will certainly make it easier to get approved for a new home loan if and when your job takes you to a new city.

[bjl584]

Can I ask why you are thinking of downgrading your housing situation? If you are able to afford the house that you are currently in, then why not just stay put until you move 3 to 5 years from now?

[HereIam2011]

Thanks for the info Josh!

bjl584- I'm considering downgrading so that I can own the condo/townhouse without a mortgage. I do not have any debt so I wouldn't be paying anything off. This would allow me to toss what ever I was paying before(the old mortgage payment) into an account saving for either a house in my next area or another investment property(if things went well). Just considering all my options.

With the condo paid off I wouldn't have to worry if it went vacant for a while. If it was rented I could get a nice amount each month to put towards whatever housing I was in at that time.

The other thing is that If I end up buying in my new location I do not want to have a current home loan counting against what I could borrow.

[MonkeyMama]

I think it is a good idea to sell your home before you buy another, and to rent a while in a new city before you buy in a new city. Downsizing is also a fine idea.

It all sounds good to me.

We certainly plan to downsize our current home when our kids are grown. Buying or renting will just depend on the circumstances at that time. We had a very good experience owning a condo when we were younger (very low maintenance) so it appeals to us very much to own a condo when we retire. (I equate renting with moving often, so it is not on the top of my list of choices. I want somewhere smaller, cheaper, and low maintenance to settle as we age).

[justinblake]

Where I came from, condos, even if they are small in size, are so expensive that it's never considered a downgrade. If one sells his house, the proceeds from that sale won't even cover the fees of a condo unit. =(



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