Tricks to Buying and Selling a Home at the Same Time
Selling your current home while buying a new one can be overwhelming. What’s more, selling and buying a home simultaneously could turn into a nightmare if your buyer decides to back out of the deal, which may leave you without enough money to purchase the home you want, OR if you sell your home but the purchase falls through, so you’re temporarily homeless. To help you avoid these situations and make the real estate transaction as smooth as possible, we’ve gathered below a few tricks on how to buy and sell a home at the same time.
Prep Your Home for Sale before You Start Looking for a New Home
Regardless of whether your home needs just a fresh coat of paint or major repairs, preparing it for sale is extremely important. Even if you’ve maintained your property over the years, so it doesn’t really need work, a few small improvements could help you sell it faster and for more money. That’s simply because buyers are willing to pay more for homes that don’t require a lot of work upon moving in. Additionally, getting your home ready to sell before listing it could speed up the home selling and buying process, which means that you’ll be able to move into your new home sooner.
Set Your Budget
If you intend to sell your home and buy a new one simultaneously, the first step in establishing your budget is to determine your home’s value. The best way to find out your property’s value is to have a home appraisal done by a certified professional. The appraisal will determine the current market value of your property and point out specific problems that could negatively impact your home’s resale value. As a result, the appraisal will indirectly indicate how much work needs to go into your home before selling it or the concessions you’ll need to make to a buyer in order to sell your property as is.
Once you know how much your home is worth, you need to find out the remaining balance on your mortgage. The easiest way to determine how much is left on your mortgage is to check your mortgage statement. In general, you can sell your home as long as its sale’s price is greater than the outstanding mortgage balance. Because most mortgage agreements include a clause that requires borrowers to pay their mortgages in full after selling their homes, your buyer’s funds will first pay off your remaining loan balance, then you’re paid the rest. If the outstanding balance is greater than the sale’s price of your home, you need to have additional funds in order to make up the difference. Additionally, make sure that you review your mortgage agreement to see if there is a prepayment penalty for paying off your mortgage early.
Another important factor is the purchase price of the home you want to buy. If the property you intend to purchase is more expensive than your current home, knowing how much you can afford to borrow can help you determine whether you’re financially ready to buy the home you want. After you figure out the mortgage amount you may qualify for, you should reach out to a mortgage lender to see the financing options available to you based on your financial situation. The type of mortgage you can get along with the loan size and interest rate that a lender is willing to offer you usually depends on your down payment amount, monthly income, credit score, credit history, and employment status.
If you don’t have enough cash to put down on your next home, and you’re not eligible for a low-down-payment loan, you may qualify for a home equity loan or home equity line of credit (HELOC), which could provide you with the money you need for the down payment. Assuming that you have built a significant amount of equity in your existing home, you could use a home equity loan or HELOC to cover not only the down payment on the new home but also the closing costs and moving expenses. Once you sell your home, you can pay off your home equity loan or HELOC from your home’s sale proceeds.
Get Pre-Approved for a New Mortgage
While selling your home first may allow you to qualify for a larger mortgage, the amount might not be as large as you think, especially if you have to pay off your mortgage balance in full before you buy your new home. Considering this aspect, it’s essential to get pre-approved for a mortgage when buying and selling a home at the same time. Besides showing that a lender is willing to lend you money in order to finance the purchase of your next home, a mortgage pre-approval indicates exactly how much home you can afford, so you won’t end up looking at properties that are outside your price range.
Include a Home Sale Contingency in the Purchase Agreement
In a seller’s market, making an offer with a contingency to sell your existing home first could be a deal breaker. However, this is the only clause you can use in order to make the closing on your new home contingent on finding a buyer for your current home. In addition, you can request to extend the closing date of your new home past the typical 30-to-45 days. This will give you enough time to sell your current home and close on your next one.
Although selling and buying a home at the same time sounds like a complicated process, you may see a significant financial return if you can afford to own two homes, which basically means carrying two mortgages, for about 6 months. In general, the summer is the most expensive time to buy a home. Conversely, the mortgage rates tend to be lower during the winter, stretching the buying power of borrowers. If you’re in the financial position to do so, you should buy your new home during the winter and hang onto your current property until the summer, when more buyers will be looking for homes. By simply implementing this strategy, you’ll be able to benefit financially from the seasonality characterizing the housing and mortgage markets. For any questions about the home buying and selling process as well as the financing options that could help you buy and sell a home simultaneously, please contact North Florida Mortgage today, so our experts can help you plan your financial journey!
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