Buying a house and selling your old house at the same time can be stressful and risky.
You could sell your house first then end up without a permanent residence until you get your perfect home.
You could also buy a new home first then end up being stuck with two mortgages to pay at once. It is therefore imperative that you carefully go through all your options before you decide what to do. Here are the options that you should consider.
Make a Sale & Settlement Contingency offer on a home
Adding a contingency to your offer on the new home may be the safest way of selling your current house and buying another one at the same time.
Your focus here will be on finding a home that you want to buy, before selling your old one.
After finding your new home, you then make an offer that has a sale and settlement contingency. This ensures that you only buy your new home if you sell the old one.
This option is most suitable if you are concerned that you might sell your home too quickly and not be able to find another to buy quick enough.
This option is also not advised in a very competitive market.
Understandably, sellers do not like contingency offers because they present more risk to the seller that the buyer will be able to buy the home.
Use your savings to buy a new home
If your savings can allow you to buy a new house without requiring funds from the sale of your current house, you may choose to use those savings to buy a house.
This option is perfect for people who are financially well off and are not in a hurry to sell their old homes, especially in a weak market.
Keep in mind that you should be very financially stable to consider this option.
This is because there are additional expenses like inspection fees, closing costs and moving costs in addition to your cash purchase.
If you are too financially strained to buy a home with cash or pay for two mortgages at a go, you may have an option to get a home equity line of credit (HELOC).
This is similar to a second mortgage. It is a loan that lets a homeowner buy a house with their current home’s equity as collateral.
It, therefore, covers the purchasing costs of your new home while you continue to pay the mortgage for your old home.
In HELOC, the lender gives the borrower a maximum amount of money for an agreed period. If you qualify to get HELOC, you can use the money you get as a down payment.
This will then use the money that you will get from selling your house to repay the loan. Keep in mind if you do not sell your original home quickly, you will have two mortgage payments and a HELOC payment.
Use a bridge loan
A bridge loan is a short term loan given by specific banks to cover the gap between buying your new home and selling the old one.
The loan covers your down payment until you close the sale on your old house.
For your bridge loan to work without a hitch, the purchase of your new home and the sale of your old home need to go smoothly.
If the settlement of your old home experiences hitches, you will still be responsible for finding means to settle your loan on time. These loans are however difficult to find.
They are not offered by many banks, and they come with high-interest rates and strict terms. If you want to consider this option, talk to your banker to see if they offer bridge loans and if you qualify for one.
Buying a home first
If you can afford to own two homes at a time and you have a lender who will qualify you, you can go ahead and buy a new home first.
A way of qualifying to own two homes is by proving that you have enough payment for both homes for six months.
After showing that you are eligible to own two homes, you might also need to settle a down payment and closing costs.
The advantage of buying a home first is that you will have somewhere to live and you will therefore not be hasty to buy a home or settle for something you do not like.
The disadvantage of buying a home first is that you will be in a rush to sell your old home. If you want to buy a home first, it is preferred that you have access to money for it, without any additional risks.
If you have to choose between borrowing and using the money on hand, consider using the money that you have.
This option is not very stressful and has minimal risks. The benefit of selling first is that you will know the exact amount of money that you will get from the sale once it has closed.
The setback with this option is that you will need to move out of the home once it closes. You, however, have the option of staying at a rental before you buy your new home.
You can also keep your belongings in a storage rental or POD then stay at a hotel in the meantime. With your money in hand, you will not feel rushed to buy a home.
You will take your time to get a deal that works for you. This option is a more difficult if you have a large family or pets that will limit your options for short term housing.
If you find your perfect home on schedule, that will be great. If that does not happen, do not feel like you need to compromise on things that you feel are important just because you urgently need a home.
Also, do not settle for an offer that you are not comfortable with just because you want to sell your home fast, or because mortgages are financially constraining you.
You may have the option to get a temporary apartment to prevent you from compromising. When purchasing and selling a home at the same time, you need to consider all the options available to you and pick the most suitable.
Get a real estate agent to help you navigate these options and to help you make an informed decision.
Buying and selling concurrently can be stressful, but careful consideration and planning for risks can still make it a possibility.
Related: Is this a good time to sell?
Give The Urban Nest Team a call at 702-580-9198 to learn more about local areas, discuss selling a house, or tour available homes for sale.