Expert: Jessica Bryan - 3/21/2005

Question
My husband and I bought our home March 23, 1999 - $89,000 (@7.0%).  The pay-off is currently $84,000. The home is 20 yrs old. We would like to purchase a NEW home. Please let us know if it would be wise to apply for a home equity loan (current market value of our home is anywhere from $115,000 - $130,000) and use 1/2 of the $ to pay off our bills and a small portion for minor repairs of our current home (before putting it on the market) and the rest for closing costs, down payments, etc. of our new home. Our credit scores are good. Could doing this hurt our chances of getting approved for a new home loan?  Should we wait until we sell our home and use the $ to pay off bills and then apply for a new home loan? Also, what is the most/least important detail to worry about before the appraisal of our current home. Our neighborhood home sales have been slowing down the past couple of months, should we worry that our home won't sell?  Will they pick up closer to summer?  Do you have any tips on selling an older home? Thank you for your time.

Answer
Hi Christine;
I think that most of your bills should be paid off with a home equity loan before you apply for a new loan. It will not hurt your chances of getting a loan. However, if there is any question, it is best to speak with a lender who deals with this on a daily basis.   My rationale is that there will be money to do repairs and minor cosmetic changes that will increase the home's value.  Make the home clean and presentable and like a model.  Evaluate the competition and make sure that your home is priced competitively and you will have better success.  You should also talk to a REALTOR about homes and values in your area.  By interviewing two or more agents they can give you a fair market idea.  If sales are slowing down it may be that prices are too high and there are not enough buyers.  It is best to price lower than the competition and let people focus on the "good deal" than to let your home languish on the market too long.  sometimes this is only a matter of $1,000 or $2,000 difference.  With Spring now here you should plant some flowers and invest in some potted arrangements that you can take with you.  Give tired old rooms a fresh coat of paint and make sure the floors, counters and other surfaces are pristine.  Use some Glade plug ins in a fresh scent (not floral) to keep the home smelling good and when showing the house turn on all of the lights, open all of the drapes and blinds and have some fresh flowers in the dining room or kitchen.  Take away and pack up all unnecessary items--even decorations.  Rule of thumb--less is more!  Don't have an overdecorated home.  It will only be a matter of a few weeks before you can put all of your stuff back (after the home sells).  Mostly, you will find that the things you pack up you don't really miss anyway.  It is surprising what these few tricks will do to help the appearance and sellability of a home.

Oh---one more thing: Clean cabinets and use an almond stick on scratches and then polish to a nice luster.  Replace old scratched fixtures and knobs.  These are the dead give-aways of a homes age.  Even older appliances can look brand new with a few replaced knobs, coils, and pans.

Good luck and best wishes.

Sincerely,
Jessica Bryan
Managing Broker
House to Home Realty Services