How to Buy a New House While Selling Yours

Nov 17, 2022

While your current home was likely the perfect option when you originally bought, needs commonly change over time. You might outgrow your home and want a larger one, wish to downsize before retirement, or need to relocate to another area. In any case, selling your first home and buying another becomes the goal.

Usually, figuring out how to buy a house while trying to sell yours comes with challenges you don’t experience when buying your first house. If you can’t purchase your new home with cash, you might ask, “Can I get another mortgage while I sell my house?” For financial reasons, “Is buying and selling a house on the same day an option?” or “Do I need a contingency in my offer?” could come to mind.

By understanding the process of selling a house and buying another, you’ll have a better grip on the situation. If you’re wondering, “How do I buy a house while selling mine?” here’s what you need to know about how to buy a new house while selling yours.

where to start first, buying or selling

How to Buy a New House While Selling Yours

Connect with a Realtor®

Figuring out how to buy a house while selling a house is tricky, particularly if you’ve never walked this road before. By connecting with a Realtor before getting started, you’ll get access to guidance and tips for buying and selling a home at the same time that make the process simpler.

Your Realtor can guide you through making an offer on a house contingent on selling yours and help you stay organized while ensuring you get the best possible deals on both fronts. Additionally, they can help you time the sale and purchase to make selling your current home to buy a new one easier to pull off.

Figure Out the Financial Side

The financial side of figuring out how to buy a house while selling another is often the most daunting. Getting a mortgage for the new home while you have one on your current property is potentially on the table for some.

The issue is that most households can’t carry mortgages on two properties simultaneously. The primary reasons include that the monthly payments would be difficult to shoulder or they don’t have enough income to qualify for another mortgage. Since that’s the case, it’s best to look closely at your available options.

Qualifying for a Mortgage Before Selling Your House

Sometimes, a household can qualify for a mortgage on the new house even if they have one for their current property. If you can reasonably afford to cover both loan payments for a period and have enough cash for a down payment and related fees and expenses, then the financial side of the equation is potentially straightforward.

Qualifying for a mortgage before selling a house isn’t unlike getting your first mortgage. You’ll need a suitable credit score, down payment, debt-to-income ratio, and income level to support the additional mortgage. Generally, the most complicated part to ensuring your housing payments across all mortgages remains below 28 percent and that your total debt payments don’t exceed 36 percent of your income. As a result, this approach isn’t practical for everyone.

Consider a Contingency Offer

If you can’t pay for two mortgages at once – even if you qualify – you may need to add a contingency to your offer if you need your house to sell before making the purchase. The contingency is essentially a clause stating that your offer moving forward is tied to the sale of your current property. While placing that condition on your purchase isn’t always an issue, some sellers may hesitate to agree if there’s a chance your house will linger on the market.

Tapping Equity

Tapping your current home’s equity using a HELOC is one approach. You can use your equity to fund a larger down payment or, if you have ample equity and are downsizing, potentially cover the entire new home purchase. Then, you pay it off with your original mortgage when your house sells.

Bridge Loans

You may be able to use a bridge loan to pay off your current mortgage and support a down payment on the new house or use it as a second mortgage to fund the new home purchase. Since bridge loans work differently than traditional mortgages, you can avoid the contingency clause.

Sell First

You do have the option of selling your current home before putting in offers on a new one. You can pay off your existing mortgage and use excess proceeds at a down payment or cover the entire purchase price. While you may need to store your belongings and find a short-term place to live, it eliminates many financial complexities.

Prepare for Your Home Sale and Purchase

search the housing market

After you figure out your finances, you need to prepare for your upcoming home sale and purchase. This part of the process is multi-faceted, ensuring you’re well-informed while also making your house as presentable and sale-ready as possible.

Research the Market

If you’re trying to determine how to buy and sell a house at the same time, understanding current real estate market conditions is essential. In a seller’s market, having contingencies on your offer is more difficult since sellers have options. As a result, while this may expedite the sale of your existing home, it could slow the purchasing side.

In a buyer’s market, having a contingency on your offer is less problematic, as sellers are at a disadvantage. However, finding a buyer for your current home is harder. Make sure your house is very competitively priced and sale-ready, making it more enticing to the limited buyer pool.

Fix Up Your House

In many cases, preparing your home for sale is a somewhat lengthy process. You’ll need to address any repairs that could make your property unattractive to buyers if you don’t plan on selling as-is. Additionally, you’ll want to pare down on your belongings, storing items like family photographs, kids’ toys, pet items, or other property that may reduce buyer interest.

Your Realtor can help you determine how to best present your home. By getting a seller’s home inspection, you can also find out about issues you want to address. That ensures your house is in the best possible shape before it’s photographed for your listing and buyers start touring.

Prepare to Negotiate the Timeline

While a 30- to 45-day closing is the norm, that timeline is technically negotiable. You can request adjusted timing for both the sale of your current house and the purchase of a new one, allowing you to create alignment.

Depending on whether it’s a buyer’s or seller’s market, you may have more success negotiating on one side of the equation than the other. In a buyer’s market, sellers are usually more flexible, while the reverse is true in a seller’s market.

Create a Backup Plan

have a backup plan

Even if you’re meticulous about trying to time the purchase of your new home and the sale of your current one, the unexpected can happen. Contingencies can help you avoid some of these challenges, but it’s also wise to expand your backup plan.

For example, know where you can move if your house sells before the purchase of your new one goes through. Have a plan for storing your belongings, securing care for pets, and transitioning children into new schools (or transporting them to their current one if you’ll be in a different district temporarily and it’s allowed).

If your purchase goes through first, make sure you have the funds available to cover the costs associated with both properties. You may have to handle two mortgages or loans, along with insurance, security systems, utilities, property taxes, and more on both houses, so have an ample financial cushion.

Ultimately, you can buy a new house while selling yours. Make sure you partner with a Realtor early in the process and know what lies ahead. That way, you can navigate the purchase and sale with greater ease.



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