Purchasing New Home - Strategies in HCOL Area?

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jasonrecite25
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Joined: Tue Apr 11, 2017 1:16 pm

Purchasing New Home - Strategies in HCOL Area?

Post by jasonrecite25 » Wed Apr 18, 2018 11:29 am

Life has shifted a bit in the past few months and our family is starting to think through how to approach buying a new home. Here are the details that I think are relevant, but let me know if more information is needed:

Current Baseline Information:
-We own our current home (i.e., no mortgage), estimated value $550k from recent comp analysis, let's say $500k general value to include any selling costs and moving cost needs.
-We have $300k in available cash.
-We have a separate $50k set aside in a emergency fund that we don't intend to touch.
-New home purchase price target is $1.2m, so with roughly $800k ($500k current home and $300k cash) available, we're targeting a 400k mortgage.
-While I don't intend this question to involved affordability, I'll state that we're doing well with retirement savings and current max 401ks, backdoor Roths, HSAs, and saving in 529 plans for the kids. Annual gross income is roughly $400k.
-Based on our current financial situation, we can get approved for whatever mortgage amount we need.
-If needed, I could possibly borrow $200-$300k from a close family member, for some short defined period of time (3,6, 9 months or whatever). They probably would loan it without any ask for interest payment so basically could look like some short of bridge loan that I would pay back from the sale of my current home if that was part of our strategy. (This person could write a check to home seller, however, would my "payback" look like a gift beyond 14k annual limit?)
-We intended to move and stay in this new home for 10-15+ years.

Market Information:
-We live in a HCOL area and most homes, desirable or not, end up with offers within 24 hours of going on the market. Desireables get multiple offers.
-We know we will be in a much better position to get the house we want, when it comes available, if we're all cash buyers or at least have no contingency offer with our current home sale.

Questions:
-Based on the above, what strategies could I employ to come to the table in the best position to purchase a new home?
-I can use the $300k in cash for a down payment, but would I need to get a mortgage pre-approved for $900k and that would enable ability to go in without contingency on my current home? Then I pay down principal on the $900k with the sale of my home and am still left with a huge monthly payment on the remaining $400k in principal? Or then would I look to refinance? What about the mortgage origination fees on $900k and refinance fees!? Those are like 1% of the mortgage value right?
-I think banks do bridge loans based on current home asset, but those can get prohibitively expensive?

Thanks for any creative input on strategies... if there are strategies to employ.

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