Are you planning on buying a new home?
What happens if you already own a home and you haven’t sold it yet? As you can expect, this is going to be a complex process. You might not have the money right away and you might struggle to secure a new mortgage.
This quick guide will show you the basics of how to buy a home before selling yours. This can help you get started as you figure out the best route for your goals.
Here’s what you need to know:
Prepare Your Current Home for Selling
Even if you aren’t ready to start selling your home, if your house meets these signs then it’s likely time to collect the cash. It might take time to sell your home, but you want to start preparing.
This includes repairing appliances and undertaking any renovations that your house needs. You can consider giving your home a new paint job to give it a new look.
You want to ensure it’s ready to sell as soon as you’re ready to put your down payment on a new home.
Make Your Down Payment
When you choose your new home, you’ll want to make your down payment before applying for a new mortgage. Except in rare circumstances, mortgage lenders won’t give you a loan until you sell your current home and pay off debts.
Once you’ve sold your home, then you can apply for a mortgage. If you can’t afford a down payment, then consider how you can earn the extra cash.
One of the easiest ways to do this is to move out of your current house and lease it out. Use the lease money to finance your down payment.
Other Financing Options
If you can’t lease out your current home then there are several other methods to finance your new home.
You can choose a cash-out to refinance. This is when you take a home equity loan to pay for your down payment. This also refinances your current mortgage.
You can also get a gift by requesting the down payment money from a friend or family member. Before you do, you must research the gift tax laws in your particular jurisdiction.
Another option is to request a sale-leaseback contingency. This is when you request a loan from a potential buyer for your home. This is to help you finance your down payment.
You’ll then pay your buyer back or offer them an extended period for free rent.
How to Buy a Home Before Selling Yours
Now you know how to buy a home before selling yours and can decide which is the best option for your needs.
Your first step should be to prepare your home even if you’re not ready to sell. Once you’re ready to sell you can try one of the financing options to make your down payment.
These can include leasing out your home to make the payment. You can also opt for a cash-out refinancing option, request a gift, or ask for a sale-leaseback contingency.
You can find more tips on buying a new home on our blog.