When it comes to home buying, the ideal situation would be to find a new home just as you receive an offer on your existing home. You then would be able to close both homes concurrently and move into your new home a few days prior to closing on your existing home. However, anyone looking to buy a new home needs to consider all the possible scenarios, in case the transition from one home to the next doesn't go as smoothly as expected.
Should you buy or sell first? There are many schools of thought on this subject. Ultimately, it depends on you and your situation. For instance, can you afford to pay two mortgages in the event your previous home does not sell by the time you move? Would you consider a bridge loan? Are you willing to move twice if you sell first and can't find your dream home fast enough?
This is where the advice of real estate sales professional is invaluable. These professionals know the current market conditions better than anyone. They are trained and experienced in working with homebuyers and sellers to determine the ideal time to buy and sell.
Generally, it is less stressful to sell your home first, so you won't have to worry about owning two homes at one time. However, the market will dictate how long it will take your home to sell, as will your location and the time of year. As a rule of thumb, it is a good idea to put your home on the market as far in advance as possible when purchasing a new one. But if interest rates are good and there is a short supply of available homes, your home likely will sell quickly. In that case, you may want to purchase a new home first.
So, what if your present home sells before you find a new one, putting pressure on you to rush the process of looking for your dream home? You then may decide to make an interim move or request to rent back your home for a specified amount of time as you continue to look for your new home. Those may be worthwhile options if you have your heart set on a specific location or type of home, or if you are purchasing a home that is under construction.
Conversely, if you buy a new home before selling your present home, you may end up with two mortgages. Under those circumstances, you may be able to apply for a bridge loan to assist you in making two mortgage payments until you sell your first home. This is a short-term, high-interest loan that lets you borrow against the value of your old home to cover the bills until you can secure the new, larger loan.
"We find that many of our clients have bought a home prior to selling their existing home," says Greg Parker, senior lead consultant at First Capital Mortgage. "Many lenders are willing to still lend money on a temporary basis even if their current property is listed. The equity line of credit is still the most popular vehicle to bridge equity from one home to another." Your real estate sales professional can assist you in finding a qualified lender.
So should you buy or sell first? It's the question of the ages. Understanding your unique circumstances, paired with the help of a knowledgeable real estate professional, should help you to make the right decision, taking you one step closer to the American dream of owning your dream home.