How to Buy a New Home Before You Sell the Old One

Everyone’s home buying situation looks a little different. We’re here to help you navigate every scenario. Generally speaking, you would sell your current home before buying a new one. There are times, however, when you may need to buy a new home before you sell your current one!

Here are 3 tips and tricks to help you buy before you sell!

  1. Extended Closing 
  2. Home Sale Contingency 
  3. Non-Traditional Down Payment Options  – Use a HELOC to fund your down payment or use a bridge loan 

Selling your current home before buying a new home is the conventional way to move. However, depending on your situation, there will be times when buying before you sell is the better option. Whatever the reason may be, you should know that buying first comes with additional risks. Having to pay two mortgages, if your current home takes a long timhttps://www.heathermurphygroup.com/buying/8-steps-to-buying-a-home/e to sell, is just one of the potential risks of buying a home before selling your home.

If you’re in a situation where you must buy first before selling, don’t worry. It’s not completely impossible, but it takes some strategic planning to make it happen.

Here are three things you can do to help you buy before you sell:

1. Extended Closing

An extended closing may be a good option if the sale of your home is expected to be complete soon. The main point for everyone to remember, however, is that no buyer is automatically entitled to an extension. If a buyer can’t close, the seller can take the position that the buyer is in default, sue for the deposit and any loss that they may suffer in the resale of the property.

2. Home Sale Contingency

When you include a home sale contingency in your offer, you can complete the purchase of the new house once your existing home is successfully sold. If you find yourself in the unfortunate circumstance of your current home not selling within a certain time frame, you can cancel the purchase contract without any penalties. To make the idea of this contingency more appealing, your agent should explain to the seller that your house is likely to sell fast given the current market conditions or whatever may apply at the time.

3. Use a Bridge Loan or HELOC

Bridge Loan

A bridge loan is a short-term, high-interest loan. When you choose to buy with a bridge loan, you can use your existing home as collateral to get a loan for your new home purchase. In an effort to help your bridge loan close faster, try aligning the closing dates of your buying and selling transactions.

HELOC

A HELOC (Home Equity Line of Credit), as the name implies, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans, such as credit cards. A HELOC will usually have a lower interest rate than other common types of loans, and the interest may be tax deductible. You should first check with your CPA regarding the deductibility of the interest.

pros of buying a home before selling

The Pros and Cons of Buying Before Selling

Pros of Buying Before Selling

The most obvious pro about buying a house before selling your current one is that you know you’ll have a place to go when you sell your place. There’s nothing more frustrating than having to find a short-term rental, especially if you have pets, kids or heavy furniture like a piano. Many places don’t allow month-to-month rentals if you’re a new tenant. That means you may have to pay for multiple months of rent even if you only need a month.

Plus, if you have a home to move into, then you won’t have to pay for moving expenses twice. You also won’t have to worry about living out of boxes.

Cons of Buying Before Selling

Not selling your house before you buy your next one could leave you on the hook for two mortgage payments at the same time. Homeowners need to have a plan for how they’ll pay for two mortgages, or have a plan to sell their house fast. This could be financially devastating, especially if selling your home proves harder than you realized.

In Summary

Buying a new home before selling your existing one has its unique challenges, but if you can leverage the three options above and utilize the guidance of an experienced agent, you can come up with the best solutions for your situation. If you want more details about this topic or have any real estate concerns, don’t hesitate to call or email us. We’ll be happy to help.