Buying a House When You Have One to Sell: It’s Not as Hard as It Seems!

buying a new home while selling your current homeYou’re ready to upgrade from your current house to a new home from True Homes. How do you handle selling a home and buying a home at the same time? Read on.

Since you’ve done it before, you know that buying a home means the start of an exciting new chapter in your life. The twist is that you are selling a home at pretty much the same time.

Selling a home at the same time you buy a new home may seem impossible, but honestly, it happens every day. You basically have two options: sell your current house and then buy your new one, or buy your new house while your current house is still on the market. There are pros and cons to both.

If you sell your current house first, you’ll have the proceeds from that sale to put toward your down payment and closing costs, but you’ll need to move twice. For most people, that involves putting at least part of their belongings into storage for a period of time.

If you buy your new home first, you’ll only have to move once. However, unless you’re paying cash for your new home, you’ll need the financial wherewithal to make two mortgage payments until your existing home sells. According to Lindsey Goins, senior loan officer with Movement Mortgage, a True Homes preferred lender, some folks get a standard home equity line of credit for the down payment on their new home before they put their house on the market. Then they can access the funds for the down payment on the new home before their current home sells.

It’s important to take out a home equity line before the current house is on the market; some lenders won’t agree to this type of loan on a house that is up for sale.

Bridge loanOther lenders offer what’s called a bridge loan, which is a temporary loan secured by the existing home to cover the down payment on the new house. They tend to be more expensive than home equity lines, but lenders may allow them when the house is listed. With either of these options, it frees you up to make an offer without a contingency clause based on the sale of your existing house.

Regardless of which way you choose to proceed, it’s best to start with visits to two professionals. The first is a real estate agent. If your house isn’t already listed for sale, meet with an agent who knows the market where your current house is located. Here are some valuable tips for selecting an agent. Then trust your agent’s advice on pricing your house and getting it into the best condition to get offers coming in as quickly as possible.

With any luck at all, that won’t be a problem. The housing market throughout the Carolinas is strong; in fact, the Urban Land Institute and PwC recently ranked Charlotte, Raleigh, and Charleston among the best real estate markets in the nation.

In Charlotte, the inventory of existing homes is very low, so you’re likely to sell your house quickly. “There are no resales,” says Broker/Realtor Daniel Chilton with Watson Group Realty in the Ballantyne area. “You’re dealing with multiple offers.”

The second professional you’ll want to visit to is a mortgage lender to help you figure out how much house you can afford to buy and what kind of down payment you’ll need. Going through the pre-approval process will give you a very clear picture of your financial situation.

Here is what you need to know before you apply for a loan. (We know you’ve done this before, but since most people only apply for a mortgage a few times in their lives, we thought a refresher might come in handy.) Checking your credit reports and your credit score before you see a lender will help you see if there’s anything in your financial history that could keep you from getting the best interest rate — or getting approved at all.

If you have sufficient equity in your current home, you could apply for a home equity line of credit for the down payment of your new home. In that situation, you need to have the financial resources to make your current mortgage payment and the HELOC payment until the house sells, and the mortgage payment on your new house.

As always, remember to shop for the best mortgage rates. A low interest rate on your new mortgage could save you tens of thousands of dollars over the life of the loan. It also can free up some cash for the True Style extras and designer packages to add your family’s personality to your new home.

Don’t forget that your financial needs go beyond the mortgage. In his article on simultaneously selling and buying a house, author Mitch Strom points out the importance of having enough capital to cover both the offer on your new home, such as the deposit, and the sale of your current one, such as staging, preparation, and any repairs the buyer requires.

If you sell before your house is ready

 Unless you’ve contracted to purchase a Quick Move-In house from True Homes, it’s quite likely that your current home will sell and close before your brand-new home is completed. The big question in that situation is where to live while you’re waiting to move in.

Most people choose from one of three options: renting a place short term (ask your listing agent or True Advisor about available short-term rentals or corporate housing), moving in with family or friends, or negotiating a rent-back agreement with the new owners of their current home.

For short-term rentals, it might be easiest to look for fully furnished units, such as corporate or vacation rentals. A person with a vacation unit likely would offer a discount to one person wanting to rent their unit for several months as opposed to having the unit sit vacant much of the time with tenants just there on the weekends or over holidays.

Assuming you all get along and you’re a model houseguest, moving in with family or friends could be enjoyable — and would help you save up even more money for your down payment and closing costs.

Renting your house back from the new owners could be an attractive option to an out-of-town buyer who’s dealing with relocation logistics of his own —and it would save you from the hassle of having to move your belongings twice. In that scenario, you would either reduce the selling price of your house or pay the new owners a monthly rent to stay in your house, usually for 60 to 90 days.

That’s a basic overview of the process of selling one house and buying a new one at the same time. It may seem daunting —and you know from experience that there will probably be a bump or two along the way. But you’re not going through it alone. Your True Advisor walks home buyers through the process every day, so he or she should have a solution to any glitch that comes up. Before you know it, you’ll be moving into your beautiful, brand-new home!