The United States has one of the most mobile populations in the world, according to a recent Gallup survey. People move frequently in the U.S., whether changing cities, counties or relocating to a new state.
In fact, 24 percent of adults in the U.S. reported moving within the country in the past five years. These moves necessitate a change in household, which often means selling — and buying — a home.
Relocating to other states or across the country can be a trying endeavor, particularly if you already own a home and are looking to purchase a new one.
When working with clients who are making a major move, real estate agents should be aware of the many issues that might complicate a new home purchase.
In addition to the intangibles of relocating — finding the right neighborhood with good schools and hospitals — there are also financial considerations, including verifying new employment and potentially balancing the burden of carrying two households.
Real estate agents familiar with not only the intricacies of their area but also the mortgage implications of a move can be a major asset to a relocating family.
Changing jobs and locales
If your clients are not only new to the area but also new to the job that brought them there, some issues are likely to present themselves when seeking a new mortgage.
First, the borrower has to prove employment at the new company. Employment can be addressed with an offer letter, relocation contract or the first pay stub. Once funding is progressing, the lender also will verify employment verbally with the employer.
There are no minimum number of days of employment at the new job to qualify, but many lenders will want to see at least the first pay stub.
In terms of married homebuyers, if one of the spouses does not have a prior work history but they do have a new job and want their income to qualify, government loans may require six months on the job prior to approval.
At that point, qualification can get complicated. Real estate agents should make sure their clients talk with a trusted lender or mortgage broker and thoroughly research what will be required of them to qualify for a loan.
Another consideration for married homebuyers is the notion of the “trailing” spouse. Often, the spouse with the new job will move ahead of the rest of the family, as the other spouse stays behind to ready the current home for sale, to allow a child to finish the school year, etc.
To qualify for a new mortgage, the entire family does not need to move, but there are some mortgage implications. For the new home to be considered owner-occupied, at least one borrower must take residence within 60 days of closing.
Also, trailing spouse income is no longer an acceptable source of income in terms of loan qualification.
Selling and moving
If your clients already own a home and are selling it as part of their relocation, there are additional issues to consider, as well.
Many lenders will require copies of all company relocation documents, including the purchase contract if the employer is purchasing the borrower’s existing home.
All terms of purchase and mortgage payment responsibility would need to be addressed.
If your clients’ current home is pending sale while they are seeking a new mortgage, most lenders that are financing a conventional mortgage will seek additional risk coverage.
If a borrower’s primary residence is a pending sale, the borrower will have to qualify with both housing payments. Also, if they have 30 percent equity in the home, they will be required to have two months’ additional reserves for the retained property and the subject property.
If they have less than 30 percent equity in the original home, six months of liquid reserves are required to cover both housing payments. For clients who don’t have the cash reserves for these costs, bridge loans might be an option to help cover the gap.
Some clients also might want to use contingency clauses to help line up their previous home sale with their new home purchase, though these may be utilized more often for more local moves.
Timing is critical in these scenarios, as most clients are trying to avoid both carrying two mortgages and using interim housing.
Often, homebuyers will attempt to make the purchase of their new home contingent on the sale of their old one, but this is not often a popular option in today’s market — depending on the location.
They might also want to make the closing date on their previous home contingent on the new purchase closing date. Again, this is where a real estate agent’s expert knowledge of their area can help steer their clients toward the most viable option.
Making a major move can be a complicated — and costly — endeavor in terms of housing, not to mention the costs of the actual move itself.
Luckily, however, most lenders don’t consider costs from a move as a negative layer of risk for loan approval for a standard move. And if the employer has a relocation contract, they often will pay for much (if not most) of the borrower’s closing costs.
Finding the right location
Real estate agents can be critical resources to homebuyers relocating to a new area. Agents should know the ins and outs of the areas they serve so they can best help clients to find a home in a location that is perfect for them.
Do your clients have children? Are they looking for kid-friendly neighborhoods with a good school system? Are they the type of people who like a quiet street, or are they people who like walking to nightlife?
Of course, your clients might be any combination of these, but the point is to determine what their priorities are, so you can help them find the best home in the best location for them.
They might be completely unfamiliar with the area, so your guidance will be critical. In addition to these considerations, relocating clients might also require interim housing to help bridge the gap between when they have to show up for a new job and when they find the home that’s right for them.
Real estate agents can be a big help here, as well, whether they represent rental properties themselves.
Relocating homes can be a stressful and complicated undertaking. Buying a new home, selling the old one, and deciding which to do first — or attempting to do both simultaneously — requires a lot of forethought and planning.
Real estate agents who are familiar not only with their local market but also with the financial implications of a major move are a valuable asset to any family making a move.
Ray Brousseau serves as executive vice president for Carrington Mortgage Services Mortgage Lending Division. Please follow Carrington on Twitter or LinkedIn.