How to Buy While Trying to Sell!
How to Buy a House While Selling your Current One
One of the most common questions I get is, "Edna, I found a house that I love but I don't know what to do because I haven't sold my current house. I don't owe anything on it, but I need to buy the new house because I don't want to lose it. How do we go about this?" Well the answer is simpler than you might think!
Qualifying for the Second House
Since you don't have a loan on your current house, or maybe just a little debt, you might already be in a good position. The first step is to see if you can qualify for a mortgage on the second house. Because you don't have much or any debt on your current home, qualifying might be easier than you think. Here's what you can do:
- Get Pre-Approved: Start by getting pre-approved for a mortgage on the new house. This will give you a clear idea of how much you can afford and the loan terms.
- Finance Smartly: Once pre-approved, go ahead and purchase the new house. You might consider not putting a lot of money down and financing the bulk of the purchase price.
- List Your Current Home: After securing your new home, put your current house on the market.
Recasting Your Loan
You might not be familiar with recasting, but it's a fantastic tool in this scenario. Recasting is when you use the proceeds from selling your old home to pay down the mortgage on your new home, and then the lender recalculates your loan payments based on the new, lower balance. Here's how it works:
- Sell Your Current Home: Once your old home sells, take the proceeds and apply them to the new mortgage.
- Recast the Loan: Let's say your new mortgage is $500,000, and you sell your old home for $400,000. You then apply the $400,000 to your new loan, reducing the balance to $100,000. The lender will recalculate your monthly payments based on this new balance.
- Benefit: This approach allows you to significantly reduce your monthly payments without having to go through the hassle of refinancing.
Bridge Loans
Another option to consider is a bridge loan. This type of loan can help you bridge the gap between buying your new home and selling your current one. Here’s how a bridge loan works:
- Take Out a Bridge Loan: You take out a mortgage on your current home to finance the purchase of the new home.
- Pay Off the Bridge Loan: Once your old home sells, you use the proceeds to pay off the bridge loan.
- Flexibility: This option can provide the flexibility you need, but it depends on the specific numbers and your financial situation.
Let's Discuss Your Options
Every situation is unique, and what works best for one person might not work for another. That’s why it’s important to discuss your specific needs and options. There are many great lenders out there who can help you navigate this process and find the best solution for your circumstances.
If you need assistance or have any questions, give me a call. Let's have a conversation and find the best strategy for you to buy a new home while selling your current one. Thanks for reading!
Check out my latest YouTube video based on this blog!
