June 29th, 2019 9:58 AM by Jackie A. Graves
your first home was a huge endeavor. Remember the research? The piles of
paperwork to review and sign? The deadlines? (If you’re a first-time buyer,
check out the steps you can
expect during the mortgage process.)
you’re now a homeowner, get ready to relive all that stress and angst again to
purchase a new home — with the added complexity of also having a home to sell.
Whether you’re at the start of this journey, or nearing its end, we hope this
guide will help you feel ready and at ease.
In an ideal
world, you’d sell your existing home and use the proceeds to help fund your new
one. As we all know, things like buying and selling homes rarely go to plan.
important to do some research about your local real estate market, both where
you’ll be selling and buying if they are different.
selling side, you’ll want to understand how long comparable properties (comps)
are sitting on the market — days on market or DOM. A lot of sellers make the
mistake of entering the market too high and then having to drop their price
several times before getting enough traffic for an offer. If you want to sell
quickly, you’ll need to price your home competitively. A real estate agent can
help you find the best comps and make a pricing decision based on your move
On the buying
side, research the neighborhoods you’re interested in so you’ll be ready to
decide on a home once your current home is under contract.
also get ready to talk to lenders if you’ll need a loan for the new-home
purchase. You can start the lender search online on
both selling and buying, and will need proceeds from your home sale to fund
your purchase, your offer may have to include a “sale and settlement
contingency.” This means that your offer on the new home is contingent on
selling your existing home.
ask your real estate agent about the wisdom of making such an offer in your
local market. Contingent offers are not as attractive to sellers as traditional
(non-contingent) offers. In fact, sellers can consider other offers even after
they’ve accepted your contingent offer. If they get a new offer that they like,
you’ll have a specified amount of time (generally 24-48 hours) to drop your
contingency and agree to buy the home without conditions. If you’re unwilling
to do so, the seller can accept another offer and you’re back at square one.
In hot real
estate markets, where properties might stay on the market for days rather than
weeks and buyers get into competitive bid situations, many sellers will hold
out for traditional offers. Then they don’t have to wait for their buyer to sell
an existing house. They also may not want their home shown as being “under
contract” with a contingent offer since that could discourage other buyers from
viewing and making an offer on the home.
If your offer
is accepted, it’s time to apply for your mortgage. It’s a good idea to get
quotes from multiple lenders. You can use Zillow to request multiple
quotes, anonymously or to find a local lender in your area.
you, the lender will add your current mortgage payments to your monthly debt to
determine your debt-to-income ratio (DTI).
This ratio compares your monthly recurring payments to your gross monthly
income. Most lenders want your DTI at no more than 43 percent. You’ll need to
decide how much to put down, how much to finance, and the type of mortgage you need.
In an ideal
world, the sale of your current home will happen seamlessly along with the
purchase of your new home. But in reality, these two steps don’t always align.
If you are hoping to buy before your current home sells, here are a few loan
options that can help make the process smoother:
Home Equity Loans
Low-down Payment Loans
option if you’re still looking for a new home after your current home sells is
a rent-back arrangement.
With a rent-back, the buyer agrees to “rent” your current home back to you so
you can stay in place, usually 60-90 days.
the buyer, you may have to lower your home price, or agree to pay rent.
important to know that not all lenders allow a rent-back arrangement so be sure
to find out if this is an option for you.
With a little
preparation, it’s possible to minimize the stress of buying and selling a home
at the same time.
market(s) and price your home to sell in your desired timeframe. Decide on
whether or not you’d like to make a contingent offer and if not what loan
options you’ll want to explore with lenders.
Most of all,
good luck with your move!
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