Blog Written by Derek White, The "Buy Before You Sell" Guy
Cost Options
Plan A
The most cost-effective option for a client who is buying and selling at the same time is to avoid involving a 3rd party BBYS company completely. If the client qualifies for two housing payments and has access to at least 5% down payment funds through personal accounts, gift from a relative, etc., then the client can make a non-contingent offer on a new home and purchase the new home first before selling their current home. Once the old home sells, the client can apply the proceeds from their home sale to the principal balance of the mortgage tied to their new home and request a “recast” of the monthly mortgage payment
- Recast
- Adjusts the principal & interest portion of the existing monthly mortgage payment
- Does not affect the interest rate or term of the existing loan
- Will eliminate monthly mortgage insurance from the payment (if applicable) assuming the new principal mortgage balance is 80% or less vs the original purchase price
Cost of Plan A = $275
Plan B
If the client can’t qualify for two housing payments and/or doesn’t have access to a 5% down payment, the client can apply for a home equity line of credit against their current home (assuming the home isn’t already on the market). This Heloc will serve as the bridge financing for the new home purchase. To solve the debt-to-income ratio issue, a 3rd party BBYS company will place a backup contact on the departing home with a flexible closing date (up to 5 months after the new home purchase). This backup contract will enable the underwriter for the new home purchase transaction to omit any mortgage related payments tied to the departing home from the debt-to-income ratio calculation.
Cost of Plan B = Approximately 1% (or less) of the value of the departing home for the backup contract from the BBYS company
= Approximately $1,000 - $1,500 for the cost of the Heloc (only if needed)
Plan C
If the client needs both bridge financing and a backup contract through a 3rd party BBYS company, we’ll get proposals for a one stop shop solution.
Cost of Plan C = Approximately 2.5% - 4% of the value of the departing home (if the client doesn't end up using the program then they won't be charged the fee)
BBYS Program Highlights:
- Remove Home Sale Contingency: Simplify the home selling process by eliminating the hassles of a home sale contingency; Submit a more competitive offer!
- Access Needed Equity: Access the equity tied up in the current property to use for down payment on the new property
The value that I offer to you and your client:
- Obtain BBYS Proposals: I submit your client's profile to each of the Buy Before You Sell companies to obtain proposals specific to their situation.
- Explain Proposal Details: I discuss the details of the proposals to you and your clients - how the programs work, the equity advance amount they'll receive, potential hidden fees, etc.
- Guidance/Expertise: Help determine which proposal fits best for your client
