How to Buy a New Home Before Your Home is Sold
Your home is your greatest asset. The longer you live in your home, the more you will develop equity that you can then use to make other important financial decisions.
But you may not want to live in your home forever. Your family status may change, or you may simply find a property that better suits your needs. At that point, your home risks becoming a major liability, because few people can afford to pay two mortgages at once, even for a short period of time. That’s why many homeowners rush to sell their home while they are looking at their dream homes.
Purchasing Before the Sale – What to Do When You Have a House You Want
Problems can arise when you find a perfect home, but haven’t yet been able to sell your home. Even if you have a buyer in line, there’s the risk that the buyer will drop out, and you’ll be left to pay for two properties at once.
You don’t want to let your new home slip through your fingers. That’s why you should consider the following strategies, which will allow you to continue through with the purchase process:
Create a Contingency
One of first strategies to consider is to make sure that your offer includes a contingency for the sale of your property. Not all sellers are willing to accept these contingencies, especially for competitive houses, but others should be willing to accept the contingency if you can prove that your home is likely to sell within a short while.
Utilize Your Current Equity
If you have enough equity on your property to open up a home equity line of credit, it may be something to consider. You’ll want to thoroughly discuss it with your lender and real estate agent, because a line of credit can affect your credit score and whether or not you qualify for a home loan. However, it can provide you with the necessary cash you need to continue to “pay” two mortgages while you’re waiting to sell your property.
Rent Back to the Seller
You can also try to extend the time you have to sell your property by offering a “Rent Back” option that allows the seller to pay you some rent while they stay in their property for a short time longer. Many sellers need some extra time to move, or even time for them to find a place of their own. The rent back option allows the seller extra time to live in the home as a renter for a short while, as you continue to find someone to buy your property.
Other Options to Consider
There is always the risk that you will be unable to sell your property in time to buy your dream home. But paying two mortgages can be tough. If the above options do not work, you can consider turning your current home into a short term rental (such as AirBnB) and looking into swing loans, but these can be riskier propositions. It is in your best interests to make sure that you have a real estate agent and lender that understands your position, and does whatever they can to assist you in the process.
For more information about lending, real estate, home equity lines of credit, and how specific decisions may affect your ability to purchase a home, contact one of Open Mortgage’s friendly loan originators.