what to do when you buy a new house

Your house was perfect for you and your family when yous bought it — years agone. Just you've all grown, and at present it's fourth dimension to find something that's a better fit. Unfortunately (considering this feel usually isn't fun!), it'south time to purchase a new house while selling your electric current i.

Buying or selling a property tin can exist stressful, no matter the circumstances. But if you need to practise both simultaneously, information technology can escalate from "stressful" to an extremely daunting experience. You lot want to find the best offering for your current dwelling house while ensuring y'all have enough of a down payment for your new property. All the while, the timelines need to match up so yous're non left without a roof over your head.

A HomeLight infographic explaining how to buy a house while selling your current one.

Sound intimidating? That's ok! We've talked to veteran real estate agents to build an cease-to-end guide on how to purchase a house while selling your own. And so, instead of stressing your way through two sales, y'all can fix yourself up for success and have your numberless packed for your new home in no time.

The most important thing is to make sure y'all are partnered with someone who knows and understands all of your options.

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Get-go: Do your inquiry

Before you begin choosing the best way to buy a firm while selling your own, talk to a real estate agent who can explain and break downwards all of your options.

"The virtually important thing is to make certain you are partnered with someone who knows and understands all of your options," says Beth Nordaune, a top existent estate agent with the Enclave Team in Rochester, Minnesota.

Before you make any decisions, a real manor agent can give you a sense of what your house could list for right now and how fast it's likely to sell. They'll besides become a approximate for your timeline and build a step-by-stride procedure that makes the most sense for you lot.

Here are some factors they'll consider as they walk y'all through the first few steps:

Your current financial state of affairs: The biggest challenge yous'll likely face is coming up with a down payment for your new dwelling house while your equity and investment are still tied up in your current house. Your agent will likely ask for the budget y'all could take available to put down if yous were to buy a home today. They'll as well introduce y'all to options, such as a bridge loan or home equity line of credit, to aid in your auction if needed.
The condition of the business firm y'all own: This will factor into how fast your dwelling volition sell in the electric current market and if you might encounter whatever issues as you listing your habitation.
Your timeline: Practice y'all have any flexibility effectually moving and closing dates? Exercise you lot have a limited corporeality of time to consummate both sales? These are all questions your agent volition consider. In that location volition probable be some overlap between sales, so preparing an easy-to-follow timeline will make things a fleck less stressful.
Equity of your current business firm: This ties dorsum to your electric current financial situation, but it will give your amanuensis more information in helping y'all determine if you should sell first or buy. If you sell your home first, your equity can help in a down payment for your new property.

Next: Understand the timeline

A real estate transaction can exist a complex process by itself. But if yous decide to purchase and sell at the same time, even more steps are added that can disrupt or delay either sale.

Permit's take a look at a standard timeline for buying and selling your home, assuming in that location are no issues or hiccups.

Prepare your abode for sale (4 to half-dozen weeks): Your agent volition help yous toll your listing and aid in staging your home if needed. During this time, take a wait at your domicile's condition to see if at that place are whatsoever potential issues.
Shop for a new home (eight weeks): Once you rummage through the market and find your platonic dwelling house, it'south time to create the perfect offer. Your amanuensis might suggest adding a sales contingency, which states your purchase is dependent on you lot selling your current home first. If your offer is accepted, your agent may besides recommend a longer closing time, so you're able to sell your home and apply your equity for the down payment if possible.
List your house for sale
- Accept an offer (2 to 3 weeks): The boilerplate number of days it takes for a listing to go nether contract in today's seller's market is eighteen days, equally of October 2021.
- Get to the closing table (iv to six weeks): This is almost likely where you will see some overlap betwixt selling and buying your domicile. As yous finalize the auction on your property with a home inspection, appraisal, and all other necessary steps, you will most probable exist doing the same for your new home.
Close on your new abode (iv to 8 weeks): The verbal timeline for your closing will vary, depending on what contingencies you accept and if there are any delays with financing. Ideally, you are hoping to close on your new domicile at roughly the same fourth dimension as your electric current firm, so your moving van can go directly from your old home to your new habitation.

Ownership before selling

The get-go approach to buying while selling is but purchasing a new house before letting get of your old dwelling.

According to Utah real estate amanuensis Susan Boyer, the most significant reward here is that information technology relieves some moving stress. Instead of finding temporary housing or paying for a short-term rental, you can stay in your current dwelling and move at your own stride.

"At that point, you lot tin can motion in [to your new home], and information technology allows your amanuensis to market your current domicile that y'all were living in more effectively," says Boyer, who has over a decade of experience.

The danger, of course, is that you may be responsible for two mortgages and could get stretched or sunk financially if something doesn't go according to plan. And considering yous're waiting to sell your current domicile, you typically tin can't use your equity to pay for the downwards payment on the new property (at to the lowest degree, not without taking out an additional loan).

But don't worry. In that location are reasonable ways to become about this route. Here's an overview:

A house that you might buy while selling your own. — Source: (Ray Zhou / Unsplash)

Pick 1: Buy a new business firm and cross your fingers

In today'due south hot seller's market place, homes are going fast. You might be able to get away with buying your new firm and counting on the market to ensure your current one sells correct away.

Simply that selection tin can be scary, especially if yous don't experience confident your existing home volition fly off the market. In many cases, "buying a 2d home isn't as easy every bit ownership your first home," says Nordaune. If you're willing to take a calculated run a risk, however, this might be a adept option for you.

Option 2: Purchase with a sales contingency

When you purchase with a sales contingency, it means that a contingency in your offering states that if your current home doesn't sell past a sure date, you can dorsum out of the purchase contract without penalties. When it comes to sellers looking at offers to accept, "this isn't preferred," says Nordaune.

Still, there are situations when a seller might consider a contingent offer. One is when your amanuensis tin can explicate to the seller's agent that your electric current home will probable sell apace.

In that case, the sellers "may accept a chance and take information technology," explains Nordaune — who adds that if the home yous desire to sell isn't in a toll range with lots of need, "it'due south really tough" to make this option work.

Option 3: Buy with a bridge loan

Because many sellers utilise the coin they make from selling their home to finance the purchase of their new firm, they can often find themselves in a situation where closing dates don't align. In that case, the money they need from their current home's equity isn't quite available still. That'south where a span loan comes in.

A span loan is a relatively loftier-interest loan — often secured by your electric current home — that can be used to fund the down payment on your new house and cover expenses if you lot're juggling two mortgages. The loan is so repaid afterward selling your current dwelling, usually inside six months.

"That doesn't mean the goal is to own two homes for a long time," says Nordaune, "merely a span loan allows you lot to purchase a new home and then go back and market and sell your current home."

Nordaune says that most people who take out a span loan put their house on the market place as shortly as they find a new home to purchase. "Ultimately, they try to line up the closing dates every bit close as possible," she explains, in order to reduce the amount of time their bridge loan is open.

A person researching online about buying a house while selling their own. — Source: (Christina @ wocintechchat.com / Unsplash)

Option 4: Use a home disinterestedness loan or line of credit to buy

A home disinterestedness loan is a loan in which the borrower uses the disinterestedness in their current abode equally collateral. The loan creates a lien confronting the borrower's house — and it as well reduces the actual equity the homeowner has in their home.

Nordaune says she doesn't see buyers become this route very frequently, since it can affect their ability to qualify for a mortgage on the new home.

A dwelling house equity line of credit (HELOC) is slightly different. While a HELOC also uses your home as security, you lot don't receive your money all at once. Instead, you can draw on your line of credit every bit needed — similar to a credit card — until you reach your adamant limit. HELOCs usually carry lower involvement rates, but those rates are variable, increasing and decreasing depending on certain factors.

If you accept a lot of equity built up in your electric current business firm, especially if you lot are trading downward, ownership with a habitation equity loan or line of credit might exist a viable choice.

Choice 5: Borrow from your investment funds

You lot can use your 401(thousand) and other retirement funds to fund your purchase, either through a 401(g) loan or a withdrawal. But information technology can be a riskier selection.

If you withdraw from your retirement account — either a 401(k) or an IRA — before you hit 59 ½ years old, you lot'll have to pay a hefty fee. Typically, the IRS will charge a 10% penalty and crave you lot to pay income taxes on your withdrawal.

Even so, there is an exception for individual retirement accounts (IRA) if you are a "showtime-time homeowner," significant y'all haven't endemic a holding in the past two years. If you qualify, y'all can withdraw up to $ten,000 without penalty. Merely it'due south important to annotation this only applies to IRA accounts, and a 401(thou) withdrawal will still take a penalization if you're a first-fourth dimension buyer.

A 401(k) loan, where you borrow from your ain retirement account, won't take a penalty fee or require taxes. Just you lot will accept to pay yourself dorsum with involvement inside a certain amount of time (typically five years). And if you default, information technology volition be considered a withdrawal, and you'll face those same penalties.

So, while borrowing from your retirement accounts may be a suitable option if you've exhausted all other possibilities, it does come up with serious risks. Not just do you risk the penalization if you withdraw the money permanently or don't pay back the loan, but y'all could also be losing out on significant futurity investment gains.

For example, if y'all accept $25,000 in your 401(one thousand) at the moment, you can expect that to achieve $175,000 in twoscore years, given a 5% annual return (and no additional contributions). But if you lot withdraw just $5,000 for a down payment, that number drops to $140,000. And then it's worth considering your long-term plans if you decide to explore this option.

Option 6: Consider your alternatives

Practise y'all need to sell your home to purchase a new i? If you alive in an area where rent is relatively high, and you lot can brand it work financially, mayhap yous can arrange to rent your house.

Renting your house as a holiday domicile, inbound into a rent-to-own scenario, or renting your firm the traditional way are all options.

However, Nordaune points out that rental income from your home isn't the aforementioned thing from the banking company'due south perspective as if you'd sold the property, particularly when the lender considers your debt-to-income ratio.

"You tin can't just say, 'hey, my mortgage payment is $3,000 a month, and I found someone to rent my house for $3,000 a month, so we should be good,'" she says. "It's not a one-for-one," but information technology could assistance.

A for sale sign on a house you might want to buy while selling your own. — Source: (Billion Photos / Shutterstock)

Selling before buying

If you want to play it safe, you tin can ever sell your home before ownership a new ane. When you go this road, you lot don't have to worry about the challenges of temporarily financing 2 homes or ownership with a contingency, says Boyer, our Utah real manor amanuensis. It also gives you some fiscal flexibility since y'all can probable utilise the disinterestedness in your electric current abode to fund your purchase.

"You have more ownership power because yous don't already have a electric current mortgage," Boyer says. "It kind of clears the route for you negotiation-wise on your new home, and oftentimes you have the ability to move more quickly."

On the flip side, if you lot sell your domicile first and cannot notice a new house, you may be left stranded. One choice, in that instance, might be moving into a temporary rental abode or bunking upwards with a relative until you lot're able to observe a new holding, and that may toll you lot more than money down the line.

For example, if y'all decide to shop all of your property while you lot're on your friend's couch, the cost of a big storage unit is roughly $300 per month. If you lot decide to opt for an Airbnb for the time existence, the average nightly price in North America is $161. That means being left in temporary housing for only a month could cost you an extra $5,000.

"A lot of markets are competitive, and it's scary. Buyers are afraid that if they sell their firm, they won't find another, and they'll be homeless," says Nordaune.

But, again, don't fret. You have several options that tin can make selling before ownership an attractive route.

Option 7: Sell and cross your fingers

If you lot alive in an area with a hot buyer'south market, significant buyers have more power, this could be a practiced option for yous. In this state of affairs, the market will likely assist y'all find the right place, and you won't accept to expect too long to buy a new house later yours sells.

But, as we mentioned already, selling your dwelling earlier buying a new one is not without danger. If you're in the middle of a seller'southward market, which is likely in 2022, yous might be left with little inventory to cull from and loftier prices fastened to those homes. You lot might not find a house you like afterward yours sells — or, if the market is extremely hot, more than competitive offers might beat you out.

Option 8: Stretch out the endmost process

You can close on a house in well-nigh a calendar month… but you don't accept to. As the seller, y'all can ask the buyer for a longer closing period, which will give you lot more than fourth dimension to find a new place to live.

While some buyers won't agree to an extended closing catamenia, others might discover it advantageous equally well — especially if they're moving up and also accept a abode to sell.

Hither are some other benefits of an extended closing:

More fourth dimension to resolve whatsoever bug with the home appraisal
A longer menstruation for the buyer to secure financing
More than time to brand any repairs or concessions found in the dwelling house inspection
Less stress in packing and organizing for your move!

Two people discussing buying a house while selling their own. — Source: (2H Media / Unsplash)

Option 9: Enquire for a rent-back clause

If you sell your home and tin can't find a new one to buy right away, consider asking for a rent-back clause in the sales contract. In this scenario, you'll be able to rent your dwelling back from the new owner for a certain period of time after the sale closes — permit's say three months — enabling you extra time to search for a new domicile while keeping a roof over your head.

Option ten: HomeLight Trade-In

If yous're looking for a low-take chances way to buy a home while selling your current i, cheque out the HomeLight Trade-In program, part of HomeLight's Cash Close.

Here's how it works:

Get HomeLight'due south purchase cost: After you apply for the program, HomeLight will brand an offer on your current house and help you effigy out what y'all can afford to buy next.
Make an offer on your new habitation: When your offer is accustomed, HomeLight volition purchase your electric current firm for the agreed-upon cost, so you'll have the funds you need to close without having to accept out a bridge loan or spring through any of the other hoops outlined above.
Motility in on your own timeline: HomeLight's purchase of your property tin be completed in a thing of days. That way, you lot can have the funds to move into your new house and practice so on your own schedule.
Get total market value for your domicile: When HomeLight lists and sells your home, information technology collects whatever costs and program fees from the home's sale price. But any upside that remains volition be delivered back to you as the original homeowner.

We know that buying a house while selling your current 1 can be a challenge, but hopefully at that place'due south an option hither that will exist a not bad fit for yous. If you lot're unsure which would be the best fit for you, a qualified real estate agent tin assistance yous effigy it out!

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