How to Buy a Home When You Already Own a Home
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:
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 easy. 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 appropriately 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.
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