Step up buyer: The basics of buying a new primary residence
Timing is everything, from as long as I can remember this cliché it has always reminded me of the days I was into network marketing and some successful guy in the so called “up-line” (opposite of downline) would try to sell you on why you should buy into the business now. The tactic was used to scare you into thinking if you waited to make your decision that you would miss out on all of the people they would recruit into the business in the next 24 hours. After learning my lesson not to make impulse decisions and to start doing my research ahead I then grew wiser. Oh well, live and learn right? Years into the mortgage business I am now using this cliché about timing being everything, and what’s funny is that I have learned this from the new demographic of homebuyers that are starting to approach me.
A step up buyer is what I am referring to, this is someone who currently owns a primary residence who now given the right market circumstances can qualify to buy another home to call their primary residence. “What do I need to do to qualify to buy a new primary residence” you ask? Well to be honest it’s not really all that complex, and my answer to a potential step up buyer begins with a really basic question. “What is your motivation to buy a new primary residence”? This question serves a very good purpose and helps me to structure the new loan in order to sell it to an underwriter. I can say that the most common reason my clients give me is that they bought their first primary residence when they got married. Add 5 years two kids and a couple dogs they have now outgrown their home. This makes for an easy sell to an underwriter because this is a very make sense type of deal as this happens ALL OF THE TIME! As far as the qualification side of this, to become a step up buyer you must have a decent income. What I mean by this is you will usually have to qualify for both of the mortgage payments (current and new) and still have a low enough debt to income ratio for the approval. The other qualification is to have a large enough down payment to cover the requirement for the new purchase. Typically the down payment for a step up buyer can range from 3.5-5% however depending on credit scores and debt to income ratio a larger down payment may be necessary.
To elaborate a bit more on the “timing is everything” concept, let’s remove all of the sales pitch and get down to the basics of the idea. Take a look at the home prices right now and then have a glance at the interest rates. I personally have locked people as low as 3.75% on a 30year fixed in which 3 years ago would be unheard of. If you don’t see where I am going with this I will just flat out tell you that the combination of both home prices and historically low rates causes your new mortgage payment to be extremely low allowing you as a step up buyer to easily qualify to buy a new primary residence.
If you would like to speak with one of my previous “step up buyer” clients I can gladly get you in contact and I am sure that they would agree that now is the time to make the move. If you would like to get qualified to buy a new primary residence you can contact me now, and if you think that this article would be beneficial to someone please share it!
-Justin, Electric Loan Officer
