Planning to sell and buy in 1-2 years - Questions?

[Scott Garrison]

Hello all. Hope this is in the right section. I currently live in the suburbs of Philadelphia. My wife and I own our current home (first home purchase) that we purchased in 2019. To this date, we have been fortunate enough to build some equity with our current home. Purchase price was $290k and current market value has our house for around $380k. Due to life things, we plan on moving and "upgrading" within the next 1-2 years and staying within the area. With that said, I want to piece together a rough game plan on what our best approach is since neither my wife or I are financial experts. My wife works a salaried w2 job that is consistent with pay. My career has recently changed for the better and is a base salary + commission w2 job. Some questions I have are as follows:

1. As far as income is concerned, will mortgage lenders look at my FULL yearly w2 income (base salary + commission) ? I hear mixed opinions that it should be a steady 2-year income if I am salary + commission based?

2. There is a remote possibility that I will either be building an addition or having a space for my parents to move in to our next home. Would it just be my wife and I on the deed of the home? What if my parents want to contribute to the down payment of the home?

3. My wife and I both have "decent" credit currently in the low to mid 700's. I plan on bringing mine up as high as I can get it, hoping to be 750+. Is this a good area to be in credit wise?

4. Our current DTI is no higher than 15%. We have no credit debt, but I am actively paying off school loans with monthly installments.

5. As far as equity from current home, current principal balance is $265k. What kind of return am I looking at if I hypothetically sell my home for $380k ?

I know, lots of questions, but trying my best to prepare now. Thanks everyone for your help and advice.

[Scott Garrison]

Quote from @Alan Asriants:

Hey Scott! I tried to answer your questions below to the best of my knowledge

1. This is a better question for a lender, but since you are not fully 1099, I'd imagine that your w2 income will continue to qualify you and possibly there might be a need to see 2 years of 1099. Again, better questions for a lender. If both you and your wife have good income, I wouldnt be concerned 

2. Who is on the deed of the home is up to you. If you are on the mortgage, you are on the deed. If you want to add anyone else, you can decide to do so. Your parents can contribute a "gift" for most loan types and not be on the deed. 

3. Try to have your credit above 740. YOu will get the best rates

4. 15% is very low, work on keeping it this low, avoid CC debt, and pay them down comfortable and continue to save 

5. In PA seller pays transfer taxes 1%, and commissions 5-6%. So you are looking at around 6.5-7.5% in closing costs. By quick math, the money in your pocket will be close to 90k

I hope this helps! 

Reach out anytime if you have any questions or would simply like to connect

 Wow, thanks so much for that info!  I appreciate you taking the time to address each of those questions.  I know it's a loaded post with open-ended answers.  This definitely helps.

Any word on the future of rates in let's say 2025?  Probably not, but figured I'd ask! lol