Do you feel cramped, crowded, squeezed and jammed in your current quarters?
Has your toddler just been joined by a new sibling? Do you have earsplitting older offspring who need more turf to play music and entertain friends? Or do you simply yearn for your own tranquil adult retreat within the family compound?
Then don’t assume a more spacious abode is out of reach simply because you’re short of cash, income or equity in your current home.
“It doesn’t take that much effort to make another purchase if you find a competent agent,” says Donna States, who sells homes for Coldwell Banker. She and other real estate professionals offer these suggestions:
– Consider a “lateral” move to a lower-cost neighborhood.
Do you live in a smallish home in a premier neighborhood? If so, you might think about moving down a couple of notches to a less prestigious community where the same monthly payment will buy you a bigger house, says Robert Irwin, the author of several real estate books.
“You’re doing a trade-off–giving up the best neighborhood for one where you can meet your objective of more house for the money,” Irwin says.
To be sure, the neighborhoods with the best reputations usually enjoy more rapid price appreciation than do lower-end communities.
Home price gains correlate closely to local school quality, Irwin notes.
But that doesn’t mean you have to chain yourself to a small bungalow near the best high school in your region when perhaps another community with the second- or third-best high school would still meet your children’s needs and give you moderate appreciation. Only you can decide if you’ll accept slightly lesser schools in exchange for a larger home.
However, be careful not to move down too many notches to get more spacious quarters. A larger home in a neighborhood with poor access to commuter highways or public transportation could prove hard to market when it’s your turn to sell this next property. The same goes for a home in an area considered unsafe.
“People are very sensitive to crime these days,” says Irwin, author of “Robert Irwin’s Pocket Guide to Buying a Home,” a McGraw-Hill book due out in January. “Nobody wants to live in a high-crime neighborhood,”
How do you determine the quality of a neighborhood?
Because they’re bound to adhere to fair housing laws, many real estate agents resist characterizing neighborhoods as “bad” or “good,” fearing their statements may be interpreted as discriminatory.
But would-be home buyers have broad access to objective information, including crime statistics from the local police department and test scores from the school superintendent’s office. And merely driving through the area or carefully examining a local map should tell the story of a neighborhood’s commuter access.
– Move to a slightly lesser part of the same desirable community. Suppose you now live in a prized section of a coveted neighborhood–perhaps on a quiet cul-de-sac with a home that backs to leafy open space. Yet maybe you need a larger home for a fledgling home-based consulting business.
Then consider trading to a bigger home in a slightly less desirable section of the same neighborhood, Irwin recommends. This could be property on a busier avenue or near a railroad track.
By moving to a somewhat less desirable section of the same neighborhood, chances are you’ll pay no more for a larger home than you’re now putting out for a smaller one. Plus, both properties should gain value at about the same rate, Irwin says.
– Seek a builder “trade-in” for your present negative-equity home. Many home builders will offer you special incentives to purchase in their developments.
For instance, you may be given a $10,000 “allowance” for upgrades inside the place or landscaping outside, notes Steve Bowers, the sales manager for a Prudential Realty office.
But for buyers willing to sacrifice such an allowance, some builders “now have excellent trade-in programs,” Bowers says.
– Ask about an “80-10-10” home loan. A cash-short home buyer, who can’t raise the traditional 20 percent down payment, could be required to take “private mortgage insurance” (PMI) to guarantee the loan.
But you can get around the need for PMI by taking out a second mortgage on the property when you first purchase the home. Hence, you’re putting 20 percent down on the first mortgage by borrowing half of it from a second lender. Using an 80-10-10 loan could save a trade-up buyer more than $100 a month on his payment after the tax deductibility of the second mortgage is taken into account.
– Rent out a home with an “upside down” mortgage.
Many homeowners dislike the notion of turning their current home into a rental unit, even if that means liberating them from a place that’s too small.
“They fear the destruction of their home,” says Bowers.
But there are several ways to carefully screen tenants. For example, you can drive by their current rental to see if they have let that home and yard deteriorate.
In a rising market, renting out a former home bearing an “upside down” mortgage could give you enough time to gain the appreciation you need to eventually sell the old place without losing money on it, says Irwin, the real estate author. “If you’re going to move to a bigger place, you may have to compromise.”
