If you are in the market to sell your home and want to relocate, you might be thinking if putting your home on the market first or buying a home first will be the right choice. This will depend on everyone’s financial situation and risk tolerance. There are many ways to go about selling and buying your home.
First you will need to be aware of what will happen if you buy a house before you sell your existing one.
Getting approved for a second mortgage
Most people might have a hard time carrying two mortgages at the same time. This would mean applying to a lender for a second mortgage, lenders will take your income, your debts, your assets, any car payments and other factors into consideration before lending you money. Having equity in your existing home will not automatically get you approved for a second mortgage. Getting a second mortgage usually requires you to produce a much higher down payment compared to a first mortgage, this could mean having to come up with a 20% down payment. Your income is usually the largest overall factor mortgage lenders look at. They will determine if you are able to afford the extra monthly payments. If you don’t meet their guidelines for a second mortgage, you will be out of luck.
Making an offer on a home with conditions
Depending on the current market, some sellers might accept an offer for purchase and sale with a condition that your home must be sold before the offer for the second home will be binding. This would mean that there won’t be any risk as the offer for purchase won’t happen unless your existing home gets sold. This is very a common condition that will be accepted in a down market, as there usually won’t be any competing offers for the home you are trying to buy. But keep in mind if the seller gets multiple offers for their home, they will accept the offer with the least conditions because they would have no reason to care for your conditions in the offer.
Selling your home before buying a new one
This is usually the best and most practical choice for most people. The vast majority of people don’t have hundreds of thousands of dollars in the bank or investments to pull out and purchase a new home. However, there are a few things to keep in mind before selling your home first. It is possible that your home will sell before you are able to purchase a new home. This could mean that you could be homeless for a little while, you will need to find a temporary place to stay. If you don’t have a friends or family members house to stay at, hotels can be really expensive to stay in. This could mean having to store all your belongings in a storage facility, which will require you to rent or hire a moving company twice instead of once.
Selling your house before buying a new one will reduce your stress level as you won’t have to think about what if your current home doesn’t sell in time and that you might have to juggle two mortgages. Buying a home first means that time will be on your side, you will be able to find that perfect home in the right location with all the features you want without having to rush through the process and settling for a home that may not be ideal for you. Purchasing a home will be most peoples biggest financial decisions in their lives, its better to not rush going through this process.
I will recommend talking to your real estate agent and mortgage lender before making any decision yourself. As a real estate agent I will be able to advise you on how the current real estate market is doing and how long it would be expected to sell your current home as well with any possible risks you would face in the process.