Buying a home is a huge endeavor. The paperwork, deadlines, and research can all be a little stressful. Couple it with selling a home at the same time, and it can be very overwhelming. Here are a few things to keep in mind when you're buying and selling a home simultaneously.
You can buy and sell a home around the same time, but unfortunately it is uncommon to be able to close on a new home the exact same day you sell your old home. It would be awesome if everything was timed so perfectly, but the process isn't that neat. You're at the mercy of the market and potential buyers. You might find a great home you're ready to buy, but no one has put an offer on your current home. Or someone might be ready to scoop up your current home, but you haven't found a new place yet.
There are ways to line up these dates, but chances are, you'll have to focus more on either buying or selling first, and there are pros and cons to each.
The Pros and Cons of Selling First
When you sell your home before buying a new one, you know how much money you have to work with.
It's also easier to get a new mortgage when you've sold your old home. You won't have two mortgage payments holding you back. Logistically, selling first is usually the best way to go. But it does come with a few disadvantages, too.
For one, you could sell without having anything lined up. You may have to rent while you look for a new home, or keep some belongings in storage.
The Pros and Cons of Buying First
If you buy a home before your sell your old one, you have plenty of time to move. This give you more time to get your home ready to sell and ease into the process.
Of course, if your home doesn't sell for a while, you could possibly be paying two mortgages at once. If your home is already paid off, that's not a big deal, but most of us would struggle with two mortgage payments. Plus, it's harder to qualify for a new mortgage if you have two mortgage payments, because you have a much higher debt to income ratio.
If you buy first, one solution is to rent out your old home. This would help you cover the mortgage payments while you move into your new home. Of course, now you have the added responsibilities of becoming a landlord. You will also want to ensure there is a market in your area for rental property.
While selling first might seem like the best bet, it also depends on the market. That way, you can optimize your stronger role while protecting yourself in the weaker role.
As a general rule, you want to sell first in a buyer's market. In a seller's market, you might consider buying first, provided that your property can indeed sell quickly. Market trends vary not only on a large scale, from city to city, but even within communities. Your Realtor can determine the types of markets to expect in both the community you are selling in and the community you plan to buy in.
Ideally, you want the closing date on your old home to come after your new home. You can make the selling and buying dates line up a little better by preparing for one while actively doing the other.
For example, if you’re actively selling your current home first, prepare to buy a new home in the mean time. Research your options, keep your credit score high & make sure to discuss your plans with your lender.
With a little preparation, it's possible to minimize the stress of buying and selling a home at the same time. Together with your Lender and your Realtor, come up with a plan for making it as seamless as possible.