The process of moving is both exciting and challenging, and when you combine the purchase and sale of real estate all at once, it can feel like an intricate dance. Is it better to buy first or sell first? Each option comes with its own set of pros and cons, and understanding them is crucial to ensuring a smooth transition without losing your cool — or your financial stability.
Buying First
Opting to buy your new home before selling your current one can be a tempting choice, especially if you've found your dream home and fear losing it to another buyer. If you prefer to buy first, here’s what you need to know:
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You'll be taking on two mortgages simultaneously. It’s not only important that you can afford both mortgages until you sell your home, but also that your current mortgage payment won't affect your ability to qualify for a new loan. Work with your lender to assess your financial situation and determine if this is a good option for you.
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You'll need cash for a down payment. If you don’t have down payment funds saved up, there may be short-term financing options to consider. Otherwise, you may want to wait until you sell your home to free up funds for your next down payment.
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It gives you more time to house hunt. Buying a home in a seller’s market can take a while, especially when inventory is low. The benefit of buying before you sell is that you can take as much time as you need to find the right home, because you haven’t moved yet.
Pro tip: Get your home ready to list while shopping for a new house. Once under contract on your new home, you can list your ready-to-sell home immediately. If you sell quickly, you may be able to set the closing date for both transactions within the same week.
Selling First
On the flip side, selling your current home before buying a new one may seem like the safer bet from a financial standpoint. Here are the things to consider:
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You'll need a place to stay until you find a new home. Unless you can bunk up with a friend or relative, factor the cost of renting a house or hotel into your budget. One potential solution is negotiating a temporary rent-back option with the buyer of your current home. This arrangement allows you to remain in your sold home for a specified period, providing breathing room to find and secure your next residence without the added stress of a pending move.
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You may feel pressure to buy quickly. Being in-between houses can be stressful, and unless you’ve arranged for a long-term rental, you likely want to get into a new home as soon as possible. You don’t want to settle for your less-than-ideal home. So keep in mind that buying takes longer in a seller’s market, and factor this into your timeline.
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You’ll have more cash freed up. Once you’ve paid off the current mortgage from your home sale, the remaining cash can go toward your down payment, moving costs, and any renovations or upgrades that you want to make before moving into your new home. This is great if you’re open to the idea of a fixer-upper, which can expand your buying options over move-in-ready homes.
Don't Let Fear Rush You
Buying and selling a home is a personalized journey that requires patience, strategic planning, and a clear understanding of your own needs and constraints. By approaching it with a well-thought-out strategy, you can achieve a successful transition without sacrificing your sanity or financial stability.
Are you looking to purchase a home soon? We can help! Call us at 1-888-254-9500 or fill in your contact information on our Home Finance Resource Center and a Mortgage Specialist can contact you about your options.
This article was repurposed with permission from Ellie Mae, Inc. - Encompass© in the Winter Waypoints Article 2024