The Trick for Simultaneously Buying and Selling Your Home

The Trick for Simultaneously Buying and Selling Your Home

One of the biggest obstacles that tend to hold current homeowners back from upgrading to a new home is the confusion over how the process works. Some people opt for selling their homes first and buying second. Others stand by buying first and second of sale.

Pros and Cons of Buying Before Selling

The most significant advantage of buying a new house before selling your old one is that you have a place to stay. You won’t have to worry about a short-term rental or moving in with family. Additionally, you’ll only have to pay for moving expenses once.

A significant con of buying a new home before selling your old one is that you will be stuck paying both mortgages until you sell your old home. That could mean months of double mortgage payments until your old house sells.

Pros and Cons of Selling Before Buying

The biggest advantage of selling your home before buying a new one is that you won’t be responsible for two mortgage payments. This alleviates the pressure of selling your house below value so that you don’t have to pay a double mortgage. It also gives you the ability to take your time and ensure you can afford whatever new home you ultimately decide to purchase.

A significant disadvantage of selling first is that you may come to discover that there are no houses up for sale that meet your needs. You could find yourself waiting for months to purchase another home. Additionally, you’ll need to find short-term lodging for your family, and you’ll have to pay for moving expenses twice.

It’s Possible to Sell and Buy at the Same Time

It’s all about timing and money. In an ideal world, you would receive the proceeds from your home’s sale in the morning and use them in the afternoon to purchase your new home. However, this scenario is almost impossible. Trying to have a seller that will wait until you find a home you like, deposit and withdraw the funds on the same day, and so forth are not likely scenarios.

However, it is entirely possible to sell and buy your new home within a few days or weeks of one another. The big kicker for this method is that you’ll need to have money on hand for your down payment.

Most homeowners rely on the proceeds from the sale of their home to get the funds for their new down payment. If you’re one of these homeowners, you’ll need to think about another option for your down payment money. Fortunately, there are a few different options that you may not have realized are available to you.

Options to Obtain Down Payment Money

If you’re going the traditional lending route, you’re likely going to need about 20% of the purchase price of your home in down payment funds at the time of your closing. If you don’t have that money on hand, you can opt for a bridge loan.

This is a type of personal loan that you can obtain to get the funds you need to bridge the gap between when you buy your new home and when you sell your old one. Bridge loans are short-term, typically lasting between six months and one year. You can expect higher interest rates than your standard long-term financing options.

Another potential option to get your down payment money is to take out a HELOC on your existing property. HELOC stands for a home equity line of credit, and this type of financing allows you to tap into the current equity you have in your home. It’s important to note that you’ll be using your home as collateral for this type of loan.

HELOC lenders will typically allow you to get cash for the equity you have in your home up to 80% of its current market value. Let’s say you still owe 50% of your home’s value on your mortgage. A HELOC lender will give you 30% of the value in cash. If your home is worth $100,000, this means a HELOC can potentially provide you with $30,000.

Other available funding options include borrowing funds from your 401(k) or taking out a personal loan. Whenever talking about these funding options for your down payment money, you want to make sure that you can afford the monthly payment if the sale of your existing home falls through.

Getting a Mortgage Without a Down Payment

If you’re able to qualify for a home loan that doesn’t require a down payment, you can purchase your new home without having to worry about getting the proceeds from the sale of your existing home first. Derek Blazer of Cummings & Co. Realtors in Baltimore, Maryland, can assist you in learning about the specific low or no down payment options available to you.

The most popular no-down-payment options are USDA and VA mortgage loans. Both of these loans come with specific qualification criteria. For example, VA loans are only authorized for service members, veterans, and surviving spouses.

Another option is to opt for a low-down-payment mortgage. Popular options are FHA and government-backed conventional mortgage loans. These come with a down payment of around 3.5% of the home’s overall purchase price. Most homeowners can come up with this much smaller down payment amount. Selling and buying a home can be done simultaneously with the right strategy.

While buying and selling your home simultaneously may seem like a big challenge, it doesn’t have to be. Contact Derek Blazer of Cummings & Co. Realtors today to get the knowledgeable assistance you need to make it happen.