Buying a home can be a stressful process in itself—finding and researching the new home you want to buy, packing up your old home, getting your finances in order, paperwork, organizing everything once you move in. But unlike first-time homebuyers, repeat home buyers are in for a home-buying process that’s quite a bit tricker: selling your first home before buying your next one so that you won’t have to cover the cost of two mortgage payments. Tribute Homes recognizes that everyone going through the process of buying a home and selling a home wants to sell their current home for as much as possible, buy a new home for the best value possible, and get through the process with as little pain as possible. And because paying for two mortgage payments at once is something that most people can’t do, here are a few things to make this potentially hectic process a little bit easier when buying a new home.
Know the market
Before you seriously start the process of buying a new home and before you put your current home on the market, you should make sure you have a very good understanding of the housing market in your area and the area where you’re planning to buy. Is it a buyer’s market or a seller’s market? Only then will you be able to strategize simultaneously buying a home and selling a home.
Another way to get a good sense of the market before buying a new house is to get a better sense of your current home. You can do this by hiring an appraiser before buying and selling a home in order to price your old home fairly. It’s important to keep an objective mind when pricing your home. You wouldn’t want your current home to sit on the market for two extra months because you didn’t price it correctly.
Another tip from Tribute Homes for buying a home and selling a home at the same time is planning your schedule early. It can be hard to decide if you should buy a new home first, then sell—or vice versa? Your finances are potentially on the highwire, too. When determining whether you should sell or buy first, you’ll also need to think beyond “How can I make the move as easy as possible?” and ask yourself “Can I handle two mortgages? What if my home sells for less than its listing?” When you buy a new home both have their risks and rewards.
The pros of selling a home first are many. Selling a home first makes obtaining a mortgage easier, because if sell your home before buying a new one you’ll know how much money you have to work with. Buying a new house first also makes it easier to get a new mortgage when you’ve sold your old home because you won’t have two mortgage payments holding you back.
But selling your home first does come with a few disadvantages, too. For one, you could sell without having anything lined up, and you may have to rent while you look for a new home, or keep some belongings in storage.
Buying first means moving will be easier because it will give you more time to move in—especially on a quick move-in home that is ready sooner than a new home build. It will also give you more time to get your current home ready to sell and ease into the process of buying a home and selling a home. But buying a new home first also skews your debt-to-income ratio, which can make it harder to qualify for a new mortgage—not to mention the difficulty of juggling two monthly house payments. If your current home is already paid off, that’s not a big deal, but most of us would struggle with two mortgage payments. If you buy a home first, you can possibly rent your old home out for a while. This would help you cover the mortgage payments while you move into your new home. But then you will have the added headache of becoming a landlord.
However, there are some financial options that could make the process easier when buying and selling a home. For example, bridge loans are available specifically for those who are buying and selling a home simultaneously. Basically it’s a short-term loan that covers the down payment on your new home before selling your old one.
Whichever option you choose, make sure you’re prepared to accept the consequences: having to store your stuff and rent temporarily, or undergoing the financial burdens of dual mortgages.
BUT DON’T RELY TOO MUCH ON TIMING
When buying and selling a home simultaneously, there are many, many external circumstances to consider that are just out of your control. That’s because you’re not the only party in this equation of buying a home and selling a home. For every seller there’s a buyer, for every buyer a seller, and that comes with a lot of variables. For example, your buyers might have difficulty securing their mortgage which can throw a wrench into your entire timeline for buying a new home. Preparing yourself for the possibility of changes to your plan of buying a home and selling a home, you’ll be setting yourself up for a smoother transition.
Know your financial solutions
If you do decide to sell your current home first, the process is relatively straightforward—save for the additional cost you might incur due to renting a place to live between buying a home and selling a home. However, there is the option of a rent-back agreement, where you negotiate with lenders and buyers to be able to remain in the property for a maximum of 60 to 90 days. This will often be in exchange for a lower selling price or rent paid to the buyers. This solution can relieve some of the pressure of finding a new home, giving you additional time to house hunt before buying a new home in a community you love.
But if you’re buying first, it would be a good idea to talk to your Realtor and homebuilder about ways to decrease your financial burden and risk, including bridge loans. As mentioned above, bridge financing allows you to own two homes simultaneously if you don’t have the money available for a second down payment. This option is also very attractive if you had planned to sell your home first and use the proceeds to buy the second. In that case it will function as a short-term loan, intended to be repaid upon the sale of your original house.
Tribute Homes has a variety of new homes and new, quick move-in homes available in active-adult communities throughout North and South Carolina. Find out how easy and satisfying buying a new home can be by contacting Tribute Homes today.