Buying or selling a home can each be trying, but doing both at the same time presents its own set of challenges. If you’re considering purchasing a home when you’re already paying on an existing mortgage, then you’ll need to consider the following when thinking about the process.
Know Your Market
In a seller’s market, you’ll probably be able to get rid of your existing home without much trouble, but you may have a tough time closing on another home. Conversely, buyer’s markets make offloading your old home a chore, but landing your new house should be relatively trouble-free. Ideally, you’re moving from a seller’s market to a buyer’s market, but reality may dictate a different situation.
In any case, you’ll want to have a backup plan when it comes to your new home, and you’d do well to hire an appraiser to make sure your existing home is priced to sell, even if it means making a little less money than you’d like.
Buy or Sell First?
If you sell first, then your debt-to-income ratio should look pretty appetizing to potential lenders, but you’ll have to find a place to live while you’re ironing out the details of your next home purchase.
If you buy a new home before selling your old one, then you won’t have to worry about securing a place to live while you’re between homes, but you may have a tough time qualifying for a new mortgage while still paying on the old one. And if you do qualify, you’ll run the risk of having to pay two mortgages at the same time until your old home sells.
Whichever strategy you choose, make sure you can handle the consequences if things don’t go as planned – which is a distinct possibility in any real estate transaction.
Connecting the Dots on Buying & Selling
You may be able to make a contingency offer on your new home. That way, if your old home doesn’t sell, then you’re off the hook for purchasing the new one. However, you should know that contingency offers are decidedly less attractive than bids with no contingencies attached, so you may have trouble getting them accepted in a seller’s market.
There’s also a possibility that you could rent back your old home from the new buyers while you’re securing your new home. That way, you won’t have your old mortgage on the books when you apply for a new one, and you’ll have some extra time to explore your options.
Bridge financing can provide access to capital so you don’t have to wait on the proceeds from selling your existing home to make a down payment on a new one. Think of it as a short-term loan that you’ll repay once your old house sells.
Back to: How to Prepare to Buy a Home
The Home Buying Process Demystified
The home buying process is wrought with potential pitfalls and challenges, but when done right can be relatively painless. As champions of homebuying, we’ve created this step-by-step guide to help you through the process.
Below you’ll find an overview of the home buying timeline as well as the major components of the home buying process with links to the various steps, tools, and information to educate and empower your home search, discovery and purchase.
How Long Does it Take to Buy a Home?
Your timeline may vary, but the following is a good guideline
- Preparing to Buy a Home: 3-4 weeks
- Initial Search for Ideas: 1-4 weeks
- Building a Team: 1 week (overlap initial search)
- Pre-Approval of Mortgage: 12-48 hours
- The Home Search: 4-8 weeks (depending on criteria)
- Contract-to-Close: 14-60 days
So, on average a homebuyer will spend 30-60 days shopping and 14-60 days from contract to close. For some folks, the process can be extremely quick taking as little as 30 days total, while for others, the shopping period alone can last several months.
How Much Home Can I Afford?
The first step in the home buying process is understanding if you have the resources to buy a home. This includes knowing how much home you can afford, what type of down payment and monthly mortgage payment to budget for, as well as what type of loan program you’ll use to finance your new property.
Buying a home is a complicated process that requires a good deal of research. In the course of it, there will be a number of professionals and specialists involved. Once you’ve done your homework and assessed your resources, you’ll need to assemble your team.
Assembling Your Team
After you have a good understanding of your own wants, needs, and goals, it’s time to assemble your team and begin the home search! Who should be on your team? Who you’ll need to find on your own may vary, but the key team members could be: Real estate agent (could be a RealtorTM but not all agents are), home appraiser, title company, home inspector, insurance agent and mortgage lender.
When selecting the members of this team, take the same amount of care you would in choosing a home, because these people will be working for you to help you do just that. Trust & communication are key considerations in working with your team.
Sorting Out Your Finances
With the selection of a mortgage lender comes the application for mortgage pre-approval, a task that requires collecting the necessary financial paperwork to help obtain the approval. Once obtained the clock begins ticking because many pre-approval offers have a limited life-span before they expire.
Your Home Search
While you juggle the paperwork and timelines implicit to the process, remember that your team works for you. Now your search for (and discovering) your new home begins. Research, save, view and repeat. Remember Homes.com has all the tools you need to find and keep track of your favorite properties and home shortlist.
You’ve got a mortgage pre-approval in hand and have found a property you can afford to purchase and see yourself living in. Time for a purchase offer to a listing agent or seller!
Once you receive an acceptance offer, the due-diligence period starts a timeline of checks and tasks for final mortgage approvals, appraisals, inspections, and other requirements that would be stated in the terms of the contract.
Assessment, Conditions & Negotiation
Many consider this to be the most difficult part of the home buying process as it includes, but isn’t limited to, inspection, obtaining the final loan, purchasing insurance, and the potentially arduous negotiation. In this part of the process, every member of your team will be utilized, and the more homework you have done in building your team, the smoother this part will go. Those who haven’t conducted their proper due diligence could potentially see the purchase fall apart at this point.
Closing the Deal!
A successful closing requires all of the team players to come together at the same time, with the same agenda, on the same date, with numbers and figures that match. From the start of the home search to the home inspection and closing the deal, the entire home buying process can take most homeowners about three months.