Moving can get complicated in a hurry. As a result, some homeowners sell their current homes while looking for a new home. The proceeds from the home sale can fund the purchase of a new home.
However, both transactions rarely happen at the same time. You may sell your current home first and continue negotiating the terms for your dream home. Some homeowners buy their new home first and wait for a buyer to purchase their current home. We’ll share the pros and cons of both scenarios, including some strategies to help facilitate a smooth transition between houses.
Submit an online application form to inquire about Angel Oak Mortgage Solutions financing options.
Buy a home or refinance your existing mortgage with Zero Mortgage.
Older homeowners can get peace of mind and added financial security with a reverse mortgage from AAG.
Selling Your House Before Buying Another One
Some homeowners sell their current home before moving into a new home. You can use an iBuyer to accelerate the process, but we’ll cover several choices. We’ll also discuss the pros, cons, and tips for selling your house first.
Pros Of Selling Your House First
- You’re not stuck with two mortgages. You don’t know how long it will take to find your next home. Selling your current house first helps you avoid two mortgage payments. Some families are in a financial pinch and struggle to afford the current mortgage. Adding an extra mortgage can lead to significant debt.
- You can get a better price. Homeowners can wait for higher offers instead of rushing to a closed deal. There is less urgency to move.
- You have more time to search for a new home. You don’t want to move into a home, neighborhood, or county that doesn’t match your expectations. You want to enjoy yourself in your new home. Giving yourself more time to search helps you find a better home.
Cons Of Selling Your House First
- You may not find the right home. Selling your home first without a backup plan can lead to frustration. Not every homeowner finds a new home that fits their needs. Remodeling your current home may be the better solution.
- Uncertainty about your plans. Looking for a home creates uncertainty. You can’t plant your roots and familiarize yourself with neighbors. You may float around from community to community before finding a good home. When you sell your home, you also walk away from your current neighborhood, making you feel lonely and isolated.
- Rent payments. Unless a friend lets you stay over, you still have to pay for a roof over your head. Rent payments don’t build equity, and you may live in a cramped place for several months before closing on your next home.
- Doubles moving costs. You’ll have to move from your home to a temporary location. After finding your next home, you’ll have to move again. If you have two moves on the way, it’s extra important to plan out strategies to lower costs.
Tips For Selling Your House First
- Reach out to an iBuyer. iBuyers will provide you with a quick cash offer on your home. You can quickly sell your current home without any marketing.
- Get in touch with a real estate agent. Agents can promote your listing and speed up the process. Agents represent multiple homeowners. Your agent can also help you find a home if you want to relocate nearby.
- Find temporary housing. You’ll still need a place to stay. Ask friends if they’ll let you in for a few months or look for a nearby hotel. Arrange for temporary housing before closing the deal.
- Consider a lease-back. Not every buyer is in a rush to move into their new home. A lease-back lets you live in your current home and pay rent to the new owner. You can use this time to find a new home, so you only have to move once. A lease-back will only work if the new owner agrees to it.
Buying Another House Before Selling Yours
Some homeowners prefer to buy a house before selling their current home. This choice comes with several advantages and disadvantages. We’ll cover the key details and provide some tips along the way.
Pros Of Buying Another House First
- You have a place to stay. You don’t have to ask your friends for a place or find a hotel. You can immediately go into your new home and turn to the next chapter of your life.
- Greater control over your time. Buying a home first gives you more flexibility on your move. You can relocate when you desire and avoid the messy middle between selling a home and buying a new one.
- You only move once. Moving is stressful enough. Buying a home first ensures you only pack up one time. A single move will reduce moving costs.
Submit an online application form to inquire about Angel Oak Mortgage Solutions financing options.
Buy a home or refinance your existing mortgage with Zero Mortgage.
Older homeowners can get peace of mind and added financial security with a reverse mortgage from AAG.
Cons Of Buying Another House First
- You end up with two mortgages. Some households barely manage to pay off their first mortgage. Some families buy new homes to downsize. Purchasing another house first will temporarily leave you with two mortgages which can put you in debt.
- You have a lower chance of getting your mortgage approved. Buying first results in a higher debt-to-income (DTI) ratio. This high metric may disqualify you from some loans and raise your interest rate on any loan you secure.
- Challenges with the down payment. Lenders may ask you to commit more to the down payment to compensate for a higher DTI ratio. You’ll also have fewer funds for your down payment. Selling your house gives you a windfall of cash for your next home. Without that sale, you’ll have to find other ways to make the down payment.
Tips For Buying Another House First
- Get a tenant in your old property. Rent payments can make up for your second mortgage. Some people who buy a home before selling become real estate investors. They enjoy reaping the cash flow from their old home while living in their new home. You can also collect rent payments while waiting for a buyer to show up with a reasonable offer.
- Include a sales contingency. Contingencies reduce a seller’s risk if certain conditions don’t come to fruition. A sales contingency requires the sale of your existing home for the deal to go through. If your current home doesn’t sell, the deal for your new home will fall through the cracks. You may miss out on a great home, but some people won’t want to risk paying two mortgages. Not every seller will accept this contingency, but they may be lenient in a slow market.
- Sell your home to an iBuyer. An iBuyer can quickly present you with a cash offer and speed up the sale. You don’t have to promote your listing or reach out to prospects. The iBuyer will present a cash offer, and it’s your choice to accept or not.
- Use a HELOC from your old home. Depending on how much equity you have in your home, it’s possible to take out a home equity line of credit. You can use this loan for your new home’s down payment. You can pay back the HELOC when you sell your old home.
How to Sell Your Home and Buy a New One At The Same Time
Some homeowners want a smooth transition from their current home to a new home. You can manage the balancing act of buying and selling at the same time. These guidelines will help you along the journey.
Do Your Research
Your financial condition, timeline, and current home are some factors that determine your choices. You can meet with a real estate agent to discuss your options and make a decision.
Buyers Vs. Sellers Market
Buying and selling with the market can help you earn top dollar on your sale while saving on your purchase. A buyer’s market takes place when there are many homes and few buyers. Some people will buy during these markets and wait for a seller’s market to emerge. A seller’s market occurs when the number of buyers exceeds the number of homes for sale.
Selling during a seller’s market leads to higher asking prices. These markets also increase the likelihood of bidding wars. Some homeowners prefer not to time the markets, but paying attention to the current market can increase your proceeds from both transactions.
Figure Out Financing Options
Buyers can leverage several loans to buy their homes. Financing options depend on credit scores, debt-to-income ratios, and other factors. A higher credit score and less debt will open up more opportunities and lower rates. Some people sell their current homes first to get more financing options for a future home.
Consider Using An iBuyer
An iBuyer takes most of the complexities out of selling. Knowing you have an iBuyer on your side gives you more time to focus on finding a new home. You can close a deal with an iBuyer sooner than a traditional prospect.
