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How to Buy a House Before Your Other House Sells

How to Buy a House Before Your Other House Sells

In a buyer’s market, the inventory of homes for sale can be astounding.
Deciding on a home to buy is difficult enough, but what happens when you have
one to sell beforehand? Many times, especially in a soft real estate market, a
buyer may get into a situation where they find a new house before their current
house sells. Acting as a buyer and a seller in separate transactions can be
tricky business, especially if you need the equity from your current home to pay
for the new home. Luckily there are some best practices that can help show you
how to buy a house before your other house sells.

Consider a Bridge or Home Equity
Loan.
There are many financing options available when it comes to home
buying, and bridge loans can be an easy way to finance a new home sale before
your existing home closes. A bridge loan is one that is used to provide funds
needed for a short period until another source of funds becomes available.
Sometimes called a “swing” loan, it allows a homebuyer who needs the equity in
his old home to pay for the new one to close on the new home purchase before
closing on the old home sale. The interest rates on these loans are typically
high. However, because the loan will be paid off in a short period of time, this
should not be a huge problem for buyers. In a similar vein, you might consider a
home equity loan on the house you already own. This is a bit riskier, but
provides the same benefits.

Rent your current home. If you can find short-term or
month-to-month tenants who are willing to rent your current home until it sells,
you can avoid having to worry about the house sitting vacant while you are
moving into the new home. This can help you avoid having to winterize or
de-winterize the property and stage the home for showings. You will also be able
to apply the rental income to your existing mortgage on the house, to alleviate
the financial burden of paying two mortgages.

Work with the Seller. In a soft market where buyers are
limited, sellers are often willing to work with the buyer on a purchase
agreement that works for both parties. If you’ve already found the house you
want to buy, but haven’t yet sold your existing home, it may be possible that
the seller will allow you to make a small down payment with a signed contract
that permits you to wait to make the purchase until your old house sells.

Should I Buy a New House Before I Sell the Old One?

Buying a new house before your current house sells is not an ideal situation,
but there ways to get through it that can alleviate the risk and financial
burden. If you’ve considered the options above and are still unable to find a
solution that works, an alternative and less attractive choice may be to hold
off on buying a new home until your existing home is the final stages of
closing. As disappointing as this can be for sellers who are anxious to move, it
is a more desirable situation than being stuck with two mortgages and no
remaining credit for other daily or emergency needs.

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