You may be wondering if there is a right order to buying and selling a home when you're already a homeowner. For example, would it be better to sell first and then shop for a new home?
Or maybe it's best to buy first then sell your current home?
This article will help you to understand the advantages of each scenario as well as a creative alternative.
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One of the main perks of buying first is that you can take your time to shop around, similar to the way it was when you first bought your home. You can visit as many open houses as it takes to find just the right one without any pressure to rush your decision.
You can also take your time to plan the move, make any repairs or upgrades, and even move your stuff little by little instead of packing it all in one moving day. Changing your address, turning on utilities, and making changes to childcare and school can also be coordinated with ease when you buy first.
On the other hand, there may some overlap in mortgage payments if you don't sell your current home within a month of buying your new home. If the possibility of carrying both mortgages sounds like too much of a burden then buying before selling may not be for you.
You'll also want to consider that your income and debts affect how much you qualify for. In other words, it will be difficult to get approved for a new home loan if your income can't support two mortgages.
Selling your home first means that you'll have your equity free and on hand, ready to make an offer on the next house. In a competitive market, having cash on hand is a significant advantage.
You'll also save money by not having to pay two mortgages and utilities at the same time. It can even seem pretty wasteful to pay double when in reality you are living only one home.
While avoiding paying double would be ideal, you should know that there may be some overlap. For example, you will likely have temporary housing in an apartment while you shop for your new home. In this case, you'll probably pay a month or so of rent plus your mortgage.
But this is still a better scenario than paying for two mortgages for an indefinite amount of time. Remember that when you buy first, you are at the mercy of other homebuyers. If instead, you're renting, the worst that can happen is that you pay a fine for breaking the lease early.
Plus there's also the feeling of being rushed to find a home. When you sell first and are renting an apartment, there's a sense of urgency to buy quickly and stop "throwing money away" towards rent.
We've given you the pros and cons of both selling-first and buying-first scenarios.
Now we want to share an alternative to both: make an offer that is dependent on selling your current home.
This is called a "contingent offer."
The main benefit is that it bridges your current home to your future home so that you avoid double mortgage payments and the need to rent an apartment.
You may be wondering what to use as a down payment if it's tied up in the equity of your current home. A possible solution is to take a home equity line of credit (HELOC) --a home loan product that you can apply for right now using our online application --and use it to cover the down payment while still paying the mortgage on your current home. KS StateBank offers two types of Home Equity programs: Home Equity Lines of Credit (HELOCs) and Home Equity Loans. Both have their own advantages, and you can put either one to work almost immediately. Read more about our Home Equity programs here.
Whether you buy or sell first, it requires quite a bit of coordination, especially when it comes to qualifying for a new home loan. Find out the expert advice you need and learn more about your options by contacting us today!
Ready to learn more or take the next step, contact us today to see how we can get you the best rate possible for your situation and let our experienced loan professionals help walk you through the process.