Why You Should Buy Before You Sell Your Home

If you buy a home before selling your current home, you remove many steps from the home buying/selling tandem.

If you sell your home before you buy a new home, you will need to rent an intermediate home to live in while you finish the steps of buying the new home. This likely means renting storage for your belongings as well.

Market Conditions Matter

If prices are heading up quickly (a seller's market) in the area where you are buying, waiting could cost you money.

You could always put a contingency on the sale of your existing home when making your offer, but sellers in such market conditions will likely have other prospective home buyers, and any offers without contingencies will push your offer down the ladder and possibly out of contention.

It Makes Selling Easier

Trying to sell your house while you're still living in it, or while moving out of it, is far from ideal. Your real estate agent needs to bring prospective buyers through your home. This means you need a certain amount of staging in place beforehand, which could be quite challenging if you're there too.

Should you decide to buy before you sell, you may not have the funds available for the downpayment on the new home.

This does not mean you are out of luck. You have two options at your disposal to bridge this gap in funds.

Bridge Loan

Just like the name, this type of loan bridges the gap between the time you buy your new home and sell your existing home. This solution makes you a more competitive buyer since you won't have to add a contingency to your offer.

These are short-term loans with payoffs from 6 months to 3 years. With this type of loan, you can borrow up to 80% of the value of the existing home and the home you intend to buy.

Bridge loans carry interest rates higher than mortgages. However, since they are short-term loans, you will not be paying the higher interest for a lengthy period.

Home Equity Loan

These involve borrowing against the equity in your existing home, typically up to 80%/90% of the appraised value. They act like second mortgages in that they have longer terms than bridge loans and tend to have lower rates than bridge loans.

Your best bet when moving homes is to buy before you sell. There are fewer hassles and fewer risks, and you avoid the dreaded contingency requirement when making an offer to buy a home.



When you are ready to make the move, visit New American Funding or give us a call for a quote on a loan.