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    Selling house???

    So hoping some on here with financial background can help. My gf owns a house but the neighborhood is goin down hill so she is thinking of selling and moving to an apartment in the interim. Her main concern is the impact this may have on her credit score as she was trying to build it up so she can purchase a nicer house but get better rate so she isnt paying a ton more for her mortgage. Will selling her house & moving to an apartment impact her score negatively or drastically slow down her ability to increase credit score?



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    Re: Selling house???

    Quote Originally Posted by clone4lyfe View Post
    So hoping some on here with financial background can help. My gf owns a house but the neighborhood is goin down hill so she is thinking of selling and moving to an apartment in the interim. Her main concern is the impact this may have on her credit score as she was trying to build it up so she can purchase a nicer house but get better rate so she isnt paying a ton more for her mortgage. Will selling her house & moving to an apartment impact her score negatively or drastically slow down her ability to increase credit score?
    I can't imagine why it would hurt her credit score if she is paying the mortgage off in full from the proceeds.



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    Re: Selling house???

    Quote Originally Posted by clone4lyfe View Post
    So hoping some on here with financial background can help. My gf owns a house but the neighborhood is goin down hill so she is thinking of selling and moving to an apartment in the interim. Her main concern is the impact this may have on her credit score as she was trying to build it up so she can purchase a nicer house but get better rate so she isnt paying a ton more for her mortgage. Will selling her house & moving to an apartment impact her score negatively or drastically slow down her ability to increase credit score?
    As long as she's made her payments on-time I would not worry about any negative impacts to her credit score.

    My concern would be taxes. I hope a tax expert will chime in here, but my understanding is if she sells the house for a profit and doesn't buy a new property of equal or greater value within six months, she has to pay capital gains tax. You can postpone capital gains on property if you keep "moving up" to a bigger and better house and I believe at age 55 it is then waived. But if you sell and don't buy a new property there could be some tax implications. Any CPAs want to correct me here?



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    Re: Selling house???

    Quote Originally Posted by ruxCYtable View Post
    As long as she's made her payments on-time I would not worry about any negative impacts to her credit score.

    My concern would be taxes. I hope a tax expert will chime in here, but my understanding is if she sells the house for a profit and doesn't buy a new property of equal or greater value within six months, she has to pay capital gains tax. You can postpone capital gains on property if you keep "moving up" to a bigger and better house and I believe at age 55 it is then waived. But if you sell and don't buy a new property there could be some tax implications. Any CPAs want to correct me here?
    Is anyone having problems with capital gains right now? I'd have to guess it is much more likely (based on the little information that we have) that getting enough to just pay off the loan would be a good scenario here.



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    Re: Selling house???

    Quote Originally Posted by Cyclonepride View Post
    Is anyone having problems with capital gains right now? I'd have to guess it is much more likely (based on the little information that we have) that getting enough to just pay off the loan would be a good scenario here.
    Good point, however, I don't think the housing crunch hit Iowa as hard as some places so yes, I think some people will still have to think about it.



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    Re: Selling house???

    Yea she wouldn't be getting much more than she owes on it. My thing is that I think it would help more b/c she could use money saved from paying cheaper rent then het mortgage to pay down car loan or any other small debt she may have then start saving for bigger down payment



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    Re: Selling house???

    Quote Originally Posted by ruxCYtable View Post
    Good point, however, I don't think the housing crunch hit Iowa as hard as some places so yes, I think some people will still have to think about it.
    True. Probably in this case depends on whether she took out a home equity loan and got it upside down at all (or even).



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    Re: Selling house???

    Quote Originally Posted by ruxCYtable View Post
    My concern would be taxes. I hope a tax expert will chime in here, but my understanding is if she sells the house for a profit and doesn't buy a new property of equal or greater value within six months, she has to pay capital gains tax. You can postpone capital gains on property if you keep "moving up" to a bigger and better house and I believe at age 55 it is then waived. But if you sell and don't buy a new property there could be some tax implications. Any CPAs want to correct me here?
    If she has owned it and lived in it for two years or more, any gain should be exempt from income. (Unless she sells it for $250,000 more than she bought it for, in which case, I would like to discuss investment strategies with her.)

    See:
    Sale of Residence - Real Estate Tax Tips



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    Re: Selling house???

    Quote Originally Posted by ruxCYtable View Post
    As long as she's made her payments on-time I would not worry about any negative impacts to her credit score.

    My concern would be taxes. I hope a tax expert will chime in here, but my understanding is if she sells the house for a profit and doesn't buy a new property of equal or greater value within six months, she has to pay capital gains tax. You can postpone capital gains on property if you keep "moving up" to a bigger and better house and I believe at age 55 it is then waived. But if you sell and don't buy a new property there could be some tax implications. Any CPAs want to correct me here?

    No. Gain from the sale of a principal residence is generally excluded from taxable income. You're thinking of 1231 exchanges for business/investment properties.



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    Re: Selling house???

    Quote Originally Posted by clone4lyfe View Post
    So hoping some on here with financial background can help. My gf owns a house but the neighborhood is goin down hill so she is thinking of selling and moving to an apartment in the interim. Her main concern is the impact this may have on her credit score as she was trying to build it up so she can purchase a nicer house but get better rate so she isnt paying a ton more for her mortgage. Will selling her house & moving to an apartment impact her score negatively or drastically slow down her ability to increase credit score?
    I own a mortgage company so I deal with this type of credit question daily. No, it won't initally hurt her score, it will actually help it, as long as it's not a short sell or something like that. The fact that a large account was paid in full will help her score. Now that being said, she needs to hold 2-3 large accounts(over 1500 limit). That doesn't mean she needs to carry any balance on them, just having it available will help her. So, don't buy into that crap about needing to get loan just to boost your score, you can accomplish the same effect, if not better, but just going to her Credit Union and getting a small signature Line of Credit(preferably 2000 or higher) and then DON'T USE IT. There is a myth I've heard a ton of times from people thinking they need to carry a balance on loans and credit cards to help their credit and it's not true. The best way to improve your score, besides on time payments obviously, is to have available credit.



  11. #11
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    Re: Selling house???

    Thanks clonetil! That's exactly the kind of info I was hoping to get here.



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