August 18, 2020
Buying a home is stressful. Selling a home is stressful. What do you get when you have to do both? More stress.
It is not uncommon to find yourself in a situation where you have to buy a new home and sell your current home in a limited time frame. This is especially common for people who get a job in a different location from where they currently live. Such people are left with the complexity of, not one, but two housing markets as well as two mystifying real estate processes.
When you need to buy and sell at the same time, you need to really think about the financial and emotional burdens you are equipped to put on yourself. You have to think about, for instance, if you can afford two mortgages, or if instead you are willing to endure living in a hotel or crash on a friend’s couch.
The following are a few methods you can use to transition to a new home:
Selling, then Buying
One option is to buy your home and live in limbo at a loved one’s place or a hotel until you buy your new home.
This option is good because you have financial leverage from your previous sale. You also can purchase your new home knowing the net sale of your previous home. This can be less stressful than other options.
However, a setback is the limbo period where you are looking for a new home. You need to plan ahead and arrange this with whoever you will be living with. You also might have to combat the mounting pressure to buy as soon as possible, which can be detrimental to finding the perfect home for you. When using this approach, it is good to get pre-approved for a loan and already have specifics of what you want in your new home to expedite the process.
Buying, then Selling
Another option is to buy your next home and then sell your current home. This is good if you don’t want to feel the pressure of the limbo period experienced when buying after selling, such as when you have to relocate for a new job.
With this approach, you can take your sweet old time moving. But, you do have to pay two mortgages, and don’t forget about closing costs, moving expenses, down payments, etc. This can greatly impact your debt-to-income ratio and therefore your ability to qualify for a mortgage. You need to plan carefully how you will finance this scenario.
You can sell your home with the contingency that the new homeowners will rent it back to you for a specified time frame. This allows you to stay in your home while looking for a new one.
You can put an offer on a home with the contingency of selling your previous home. If your home doesn’t sell in time, you are not bound to accept the new one.
Buying and Selling at the Same Time
It’s not impossible, if you can pull it off. Once you are ready to close on the sale of your home, you can delay the close and make an offer on your new home without a sale contingency. The idea is to get the two closures to occur on the same day. This method relies on the seller accepting this offer, and if they don’t, you still have to close on your previous home.
Was this article helpful? Check these out:
Things to Consider Before Making an Offer on Your Dream Home
The Pros & Cons of Buying a New Construction Home
Tips for First-Time Home Buyers
How to Invest in Real Estate the Right Way
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