Buy your new house while already owning one

You are not alone if you’ve outgrown your home and want to make a new purchase. According to the National Association of REALTORS®, 68 percent of buyers were purchasing a home for at least the second time. Conclusively, many of them had to sell a home while buying a new one.

Whether trading up for a bigger house or getting into something more suited for your current lifestyle, we need to prepare and plan + have a backup plan for it. So how do you do it?  As a repeat home buyer, you can use your past experience to your full benefit!

The equity in your current home may provide a down payment for your new purchase. You can choose a 20% down conventional mortgage instead of a low-down-payment FHA or VA mortgage. How will your new mortgage payment compare to your existing one?

Now, selling one home and buying another does have its own set of concerns. Repeat buyers must correctly measure their current home’s sale and upcoming purchase. When done properly, repeat buyers will have options even when their buy-and-sell timelines don’t fall into place; low-down-payment loans and owning two homes for a short time can increase flexibility. You very well might not have to make an offer contingent on the sale of your current home for to place you in a stronger position, unless you want to!

Verify your non-contingent buying eligibility
There are no rules against applying for the new home assuming you will keep your current home. You do not need to rent it out or say you are going to do so, unless you need that for qualifying purposes. Speak to your Lender regarding this. What you will do is add your current house payment to your list of other monthly payments/debt on the new mortgage application. Qualifying for two mortgage payments at once can be a challenge but If you qualify with both homes, and are comfortable making both mortgages, you gain some flexibility and get to sell at your will after closing on your new home.

Down payment funds
In addition to the qualification, we need to think about the down payment funds for the new home. Many repeat buyers like to resource to their equity they have built in their existing home to put toward the new home they will purchase. If you plan to keep your current residence temporarily, you won’t be able to use sale proceeds as a down payment.

Some Lenders can get creative and have loan programs that enable you to buy without a large down payment; one of those is the 80-10-10 piggyback mortgage. This loan is one in which you get an 80% first mortgage, 10% second mortgage, and put 10% down. If opting for this route, you can simply pay off the additional mortgages after you close on your new home and sell your old one.

Like the idea but need to sell your home for the down payment monies?

Lets talk Contingent offers
A contingent offer is one in which you agree to buy the home if and only if your current home sells. With a contingent offer, you won’t have to worry about having two mortgages at once. That monthly mortgage debt will be gone by the time you close on your new home. Let me tell you, this arrangement comes with some risks for the buyer. Contingent offers are not as attractive to sellers compared to non-contingent ones.

Many contingent offers have the following:

  • Sellers can consider other offers even after they’ve accepted a contingent offer
  • Contingent offers usually come with a deadline, too. Buyer is to sell current home by X date
  • Many sellers will hold out for traditional offers depending on your local real estate market

Ask your real estate agent whether a contingent offer could work in your local housing market.

There’s no requirement to find a home before you sell and there are a few ways to avoid a contingent offer, qualify for the new loan more easily, and eliminate the possibility of owning two homes at once.

You can sell your existing home first and then start looking for a new property to buy, however this may mean you might have to set up temporary living arrangements and rent a storage unit. Moving twice and the extra logistics may work in your favor if you’re in a low inventory market and it may take you months to find the new new. It’s much better to take that extra time to make a well informed decision than to jump on the next available home and possibly compromise on your must have amenities just because you’re on a time crunch.

Buying and selling your home at the same time does not have to be a complicated process. Decide to sell the home before or after your upcoming purchase, then lets make a plan for it.

Thank you for reading!

Blackrock Investments and Finance, Inc.
direct (951) 963-4023 | cell (626) 731-4485 |fax (626) 529-0850
email | web
CA DRE: 01884583


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