Updated: Feb 2
Selling your current home and moving into a new home sounds like a great idea if it is timed perfectly. Oftentimes, people will have to decide whether they want to sell their current home before finding a new one or if they rather have the next home secured prior to selling. Depending on your current situation, one of these might be the better option. In this blog, we will break down the advantages and disadvantages of both options.
If you decide to sell your home first, you’ll have access to profits made on the home and as a result, can overcome a portion of the financial stress that comes with buying a new home. When going this route, you won’t be stuck making two separate mortgage payments. However, it raises the topic of temporary housing. Going this route can often leave homeowners in limbo as they search for their new home. A simple solution to this would be to plan ahead and secure a short-term rental. Another tip is to have done your research to know exactly what you are looking for in the new home. This will narrow down your options and speed up the process.
On the other hand, some might opt to purchase their new home prior to the official sale of their current home. This provides freedom to work on your timeline and even move into the new house while in the process of selling. Buying before selling eliminates the discussion of short-term renting but it does bring about two mortgage payments. You will still be responsible for your previous mortgage until the final sale of the home. However, you could consider offering your previous home as a short-term rental (Airbnb, VRBO) while looking for a potential buyer. Another downside of buying first is potential hurdles in qualification. Because you are still the owner of the previous home, your debt-to-income ratio will be much higher than if you would have already sold it. Homebuyers in this specific situation may also consider bridge loans (read more about bridge loans here). Bridge loans, in short, allow you to finance your new home prior to the sale of your current home.
Depending on your timeline and financial situation, you may lean towards one of these options more than the other. Contact us and we can give you our best opinion on your current situation! Schedule a free consultation with The Mortgage Chicks!
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Raquel Gutierrez is the Marketing Director for Mint Mortgage and Mortgage Chicks. She focuses on business marketing and development. She has a B.A. in Psychology and Marketing.