Cross collateral loans can help you buy and sell at the same time. Here’s how.
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Today I’m joined once again by Dave Marzinke of Movement Mortgage to discuss cross collateral loans.
I have a client who’s looking to sell a $1-million house in Mission Viejo that they only still owe $550,000 on. They’re also looking to purchase another house, so the plan was to sell their current home first, and close on their new home, which is listed at $1.2 million. However, this process comes with moving problems and whatever complications arise from needing to coordinate closings.
This is where the cross collateral loan can help. Nobody wants to be a contingent buyer and have to sell their current property and be in escrow before making an offer on a new home, so this loan allows you to place a loan on two properties at the same time. It also allows for more flexibility on the down payment you’ll need for your new home.
Nobody wants to be a contingent buyer and have to sell their current property and be in escrow before making an offer on a new home.
So hypothetically speaking, let’s crunch the numbers for my client. The combined value of their current home and future home is $2.2 million. The cross collateral loan can be up to 90% of that value—in this case, $1.98 million. After paying off the balance of their current home, that leaves them with a little over $1.4 million to buy their new home. They can technically buy with no money out of pocket.
To qualify for a cross collateral loan, you’ll need a minimum FICO score of 700 and a minimum debt ratio of 50%. You’ll also need six months’ worth of cash reserves for your loan payment.
If you have questions about cross collateral loans or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.
