One of the easiest, and most common, ways to progress from an old property to a newer one, is to purchase the new property and move into the new one before selling your old property. If you have read some of our previous articles about gathering a portfolio of rentals, this might not be the best move, but it does make it easier to afford that down payment on your next home.
The ideal situation would be to buy a new home, move, and then sell your old home. But for most, the financial burden of managing two mortgages at the same time, would prevent this, not to mention being disqualified from even receiving the mortgage for the second home due to high DTI’s.
If you aren’t keen on turning your old home into a rental, and need a sizeable down payment, there area few options available to you.
If possible, the first step should always be to give us a call. Based on individual circumstances, different methods could prove superior and accomplish the thing you wish to do.
Make a Contingent Offer:
This is simply a fancy way of stating that you will buy your new home once the older home sells. Or that the sale of the new home to you is contingent upon you selling your old home.
While this strategy may work in slow-moving areas, where homes are on the market for months, Utah is a pretty hot market right now, and a seller can usually count on selling their home to someone who isn’t waiting to sell their own.
That being said, it never hurts to ask or negotiate, or perhaps even sweeten the pot by offering a bit of money up front.
Bridge Loans:
A bridge loan is simply a loan which pays off the original balance left on the house, as well as a down payment on your new home. The loan itself does not usually have regular payments, instead the interest is just added on to the loan balance.
There are a couple of downsides to be aware of going this route though, If your house doesn’t sell within the allotted time frame, the lender can choose to foreclose your home. Additionally, the loans themselves are rather expensive, usually having much higher interest rates than other loans.
But, for those with no better option, this provides a way to avoid having to stay in the back of your moving truck while you wait to move into your new home.
Buying and Selling Simultaneously:
The best options usually are the most straightforward, though buying a home and selling one on the same day can be tricky to execute properly.
This is all a matter of timing. Essentially, you would need to schedule the closings of both the house you are selling as well as the home you intend to purchase, on the same day. While not too difficult to accomplish, a number of things can postpone one closing or the other. This method doesn’t have too many drawbacks though, as long as you prepare for it.
Right now, the housing market is hot enough where this can be a common occurrence, though it does require you to do some extensive legwork and make several offers very quickly.
This is actually something that we can do for you, and the first step is getting pre-approved. We can help you plan things out, so that you don’t have to take out an expensive loan, or make a weaker offering. Instead, you’ll just close both loans the same day. Ultimately, this is your safest bet, and the one which we would recommend. So, give us a call if you are looking to buy a new home, and we’ll help you get pre-approved, and close the same day yours sells.
