If you’re thinking about making a move, but you’re contemplating whether you should make sure your home sells before buying a new one, we’re here to help. It’s not as much of a mind-bending conundrum as the “what came first: the chicken or the egg?” situation. In fact, there can be some simple questions to consider to help you decide if you should tackle buying or selling your home first!
Can you risk carrying two mortgages?
Many people who decide to buy and sell their homes back to back or even at the same time have the hopes that the timelines will match up perfectly. They’re hoping to sell their home quickly and move into their new home just as they’re closing on their old one, but the reality is that rarely happens. Now throw in that we live in an unpredictable world where unexpected bumps like job loss, accidents, etc., can throw a wrench in your plans and your finances, it can be extremely risky to try to buy a new home before selling your old one. In fact, we recommend that if you do buy before selling, your savings should show that you can carry the weight of two mortgages for at least three months.
Can you qualify for two mortgages?
Just as lenders looked at your debt-to-income ratio for your first mortgage, they will do the same for your second. Lenders don’t care if you have every intention of selling your home. They look at the facts of your finances and then make the decision on whether to lend you the funds to purchase your new home. Your monthly debt payments should total less than about 36% of your monthly gross income.
What is the current market like?
If the buying market is competitive, it means that your home may sell faster, but it also means that you may have to put in competitive offers on new homes if you plan on buying a home in the same area that you’re selling in. Selling your home before buying a new one allows you to bid on a house without it being contingent on a sale and shows to sellers that you’re a serious buyer. On the other hand, if the current market is a little slower than normal, it can be smart to sell your home before buying. There are two reasons for this: One, it could simply take a long time, leaving you with two mortgages, and two, you may not get the sales price you want, which will affect your new home purchase.
In our experience, we’ve often found that it’s better to sell your home before buying another, but there are exceptions to the rule. If you’re questioning what you should do, contact our team! We’re happy to talk to you about the real estate market and make sure you make the best decision for you and your family.