Purchasing your home was quite an undertaking. Remember all the research you had to do? The piles of paperwork that needed review and signing?. Lets not forget about the deadlines! If you’re a first time buyer it’s worth checking out the steps involved in the mortgage process.
Now that you’re a homeowner get ready to experience that stress and anxiety again as you embark on purchasing a new home but with the added complexity of also having a home to sell. Whether you’re just starting this journey or nearing its end we hope this guide will help you feel prepared and relaxed.
Consider Timing
In a scenario you would sell your home and use the proceeds to assist with financing your new one. However as we all know things seldom go according to plan when it comes to buying and selling homes.
Therefore it’s crucial to conduct some research on your real estate market, for both the area where you plan to sell and buy if they happen to be different.
On the selling side it’s important to understand how long similar properties (comps) tend to stay on the market commonly referred to as days, on market or DOM. Many sellers make the mistake of listing their property at high a price only to realize later that they need multiple price reductions before attracting enough potential buyers for an offer.If you’re looking to sell your home it’s important to price it. A real estate agent can assist you in finding properties (comps). Help you make a pricing decision based on your timeline, for moving.
On the buying side take some time to research the neighborhoods that interest you. This way when your current home is under contract you’ll be well prepared to make a decision on a home.
Contingency Offers
If you’re both selling and buying a home and need the proceeds from selling your home to fund the purchase of your one it may be necessary for your offer to include a “sale and settlement contingency.” This means that your offer on the home is dependent on selling your existing one.
Consult with your real estate agent about whether this type of offer is advisable in your local market. Keep in mind that contingent offers are not as appealing to sellers, as contingent offers. In fact sellers may still consider offers after accepting yours with contingencies.
If you receive an offer that you find appealing you will typically have a timeframe (usually 24 48 hours) to waive any conditions and agree to purchase the home. If you are unwilling to do the seller has the option to accept another offer. You will be back, to square one.
In real estate markets where properties tend to sell and buyers often find themselves in bidding wars many sellers prefer traditional offers. This way they don’t have to wait for the buyers existing house to sell.
Additionally they may not want their home labeled as “under contract” with a contingent offer as it may discourage buyers from viewing or making an offer on the property.
To determine your eligibility the lender will consider your mortgage payments along with your debts and calculate your debt to income ratio (DTI). This ratio compares your recurring payments, with your monthly income.
Many lenders prefer borrowers to have a debt, to income ratio (DTI) of no than 43 percent. When buying a home you’ll need to consider how down payment you want to make how much financing you require and the type of mortgage that suits your needs.
If your current home is still on the market when you’re looking to buy an one there are loan options available that can help make the process smoother;
1. Home Equity Loans; These loans allow you to borrow against the equity in your home.
2. Low Down Payment Loans; These loans require a payment upfront.
3. Piggy back Loans; This option involves taking out two loans, one for the mortgage and another for part of the payment.
4. Bridge Loans; Bridge loans provide financing until your current home is sold and can be used towards purchasing an one.
Alternatively if you’ve already sold your home but haven’t found an one yet you can consider a rent back arrangement. In this scenario the buyer agrees to let you ‘rent’ your home from them for a period of 60 90 days so that you can stay in place while searching for a property.
Keep in mind that not all lenders offer rent back arrangements so it’s important to check with them if this option is available, to you.
Sure here’s the paraphrased version;
Get ready and get going! By doing some groundwork you can reduce the anxiety that comes with buying and selling a home simultaneously.
Start by researching your target market(s) and setting a price for your home to ensure a sale. Consider whether you want to make an offer and if not explore loan options with lenders.
Above all I wish you the best of luck, with your move!
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