There’s plenty of information available to first-time homebuyers, but it can be hard to find information if you’re trying to buy a new home while selling your old home at the same time. It can actually be a fairly tricky process because it’s hard to balance the timeline and the need for money at different times.
We’ve worked with many families who are trying to sell their homes while buying one of our new homes, so we’ve learned a few lessons about the process. These are the things you should know if you’re in this position.
It’s Hard to Time a Purchase and Sale
When you’re buying a resale home, there’s usually about a 60 day turnaround time between when your offer is accepted and when you close on the sale. This makes it easy to try to buy and sell at the same time. A lot of families can finalize the purchase of their new home and the sale of the old home within a few weeks of each other.
However, those who are purchasing brand-new homes have a longer timeline. It can take anywhere from nine months to a year to complete the build of a new home. Most people sign the agreement to purchase the new home, but wait to sell their home until just before the new home will be finished. Since there’s some uncertainty involved as to when the new home will be finished, it can be hard to decide when to put the current home on the market. However, by working closely with your builder and an experienced real estate agent, you should be able to get things right.
You’ll Probably Carry Two Mortgages for a Time
Anyone selling a home realizes that there’s a chance they’ll have to pay two mortgages if their current home doesn’t sell as quickly as they’d hoped. Usually, this only happens for a month or two, but those who are buying new homes have to pay two mortgages while the home is being built - about 9 to 12 months, as we mentioned before. Be sure to plan for this expense.
The good news is that you rarely have to be making payments on the full mortgage. New construction loans come in stages, and you’ll only have to make payments on the money that you’ve borrowed.
You Can Use Equity for the Down Payment Before You Sell
If you currently own a home, you’ve probably been thinking about using the equity in your home toward the down payment on a new home. The good news is that you don’t have to wait until your home sells to be able to use that equity. Most lenders will allow you to borrow against the equity in your home using something like a bridge loan, a home equity loan, or a home equity line of credit.
The downside to this is that you will be paying interest on that money, and you will need to make monthly payments on it until you’re ready to sell your home. For some families, using their savings as the down payment makes more sense. Once the current home sells and you have the cash from the sale, you can then replenish the savings account and increase the size of your down payment. A good mortgage lender can help you understand all of your options.
Quick Possession Homes May Be Easier
Being able to fully design the home is one of the benefits of buying a brand-new home, but this takes longer, which certainly complicates things when you’re also trying to sell your old home. One way to get around this is by purchasing a quick possession home instead. This is still a brand-new home with all of the warranties you’d expect, but it’s either already built or close to being finished. The shorter timeline allows you to quickly sell your home and move in without having to pay two mortgages for a long time.
At first glance, trying to buy and sell a home at the same time seems like a bit of a headache. There are a lot of things to think about, and you need to prepare both mentally and financially for the challenge. However, an experienced builder can help guide you through the process so that everything goes as smoothly as possible. We’d love to show you just how easy it can be to sell your current home so that you can move into the home of your dreams.