Can You Sell Your House and Buy a New One at the Same Time?

Ideally, you’ll put your home on the market, sell it fast, use the acquired equity for the down payment, and find your new house just as fast. However, in reality, it’s trickier than that as some overlap is likely to happen as you’re looking at how to buy and sell two homes simultaneously.

Buying and selling a house at the same time requires a lot of multitasking and comes with a timing challenge. You could get stuck with loan payments and the expense of maintenance on both homes if you have a mortgage on your current house and buy a home before selling. On the other hand, if you sell your home before buying a new one, you may have no place to go, other than a friend’s sofa in the living room after the sale closes.

Nevertheless, with proper planning, the right financing, and smart pricing and negotiating, you can make buying and selling a house at the same time work.

What if You Sell Your Home Before Buying a New One?

Many people sell their current homes before buying a new one because this allows them to have the sale profit when looking for a new house, which reduces financial stress. If you sell your home before buying a new one, you won’t have to manage two mortgage payments or deal with closing costs while upkeeping two properties.

However, this approach can leave you homeless as you search for another home. Meanwhile, you’re in limbo, living on your parent’s sofa in the living room. And if you have family or pets, it gets even trickier. What’s more, you need to move twice - first, to your temporary home and then to your new house.

On top of that, it can add stress as you rush toward buying a house you don’t want just to get out of your temporary home faster.

What if You Buy a Home Before Selling Your Old One?

Many benefits are associated with buying a new house before selling your old one, such as moving to your new house more easily. You can take your time, move your belongings whenever you want, and avoid being homeless while you wait for your old home to sell. 

Moreover, it may be your safest bet if you’re on a tight timeline. If you need to be in a new city for a new job by a specified date, buying a new home first will ensure you have a place to live in.

However, it’s a whole different story when it comes to financing, as buying a new house first takes considerable financial resources. Besides your existing mortgage payment, you’ll also have a new one, closing costs, moving expenses, down payment, and maintenance on both homes. This can be challenging to handle, especially if you’re on a tight budget.

Buying first can also reduce your chances of getting a mortgage. Since you still have the lingering mortgage debt to your name, your debt-to-income (DTI) ratio might be much higher. This can, in turn, translate to a lower available loan balance, higher interest rates, or not even being able to qualify for a mortgage.

How to Make Buying and Selling a House at the Same Time Work for You?

Buying and selling a house at the same time may sound complicated, but with the right resources, it doesn’t have to be. That said, here’s how to sell and buy a house at the same time:

Prepare Early for Buying and Selling

Because there’s a lot of preparation for both buying and selling, you will want to start preparing as soon as possible. With proper planning, you’re less likely to make mistakes.

That said, a great listing agent will help you prepare your house for sale, including making repairs, cleaning, and decluttering. From the selling perspective, virtually every home is too cluttered, as potential buyers want to envision their life in the space, not yours.

Once you finish decluttering and cleaning, you should focus on getting quality photos of the property to get the best first impression once you list the home for sale.

As for buying, you need to have your finances in place. Many people think they have good credit and will get approved. However, lending policies are constantly changing, and to get an offer accepted, you’ll need to have the money to buy it or be preapproved for a loan to fund the property. That is, if your lender doesn’t have any conditions your current house needs to sell first.

Get Your Finances Right

When selling a house, you’ll probably use the profits to pay off the loan and use the remaining money for your new home. However, you’ll need the finances for a down payment as well as the right financing to purchase your new house. While some homeowners can use money from their savings accounts, others may not have enough funds to do that. If that’s your case, here are several alternatives.

HELOC

You can use HELOC (home equity line of credit) on your current house to come up with the money for the down payment. However, you’ll have to have it already set up because a lender won’t authorize the credit after you’ve listed your home for sale.

If you believe you may use a home equity line of credit to finance your next home, make sure to apply as early as possible, as sometimes HELOC can take long to be approved.

Bridge Loan

With this type of loan, you can borrow 80% of your property’s worth to pay off your old loan and use the remaining money (if any) for a down payment on your new house. Alternatively, it can be used as a second mortgage to borrow some of your house equity for a down payment.

With a bridge loan, you only pay interest. Often, you can pay off these loans faster as they’re made to fill the short space between selling your old home and purchasing your new property. However, interest rates tend to be higher than for a regular mortgage.

401(k) Loan

A 401(k) loan allows you to borrow up to 50% of the balance at affordable interest rates. Lenders don’t count 401(k) loans as debt when estimating your DTI ratio for mortgage preapproval, which is a significant advantage over other loans.

While using this money for something else may be tempting, you’ll need to avoid it, as defaulting on this type of loan can result in penalties and taxes.

Low-Down-Payment Mortgage

Another alternative is to obtain a low-down-payment mortgage to buy your new house, put the profits toward your next property, and recast your mortgage once the sale closes if your lender offers mortgage recasting.

Time It Properly

Once your finances are all set up, a real estate agent can assist you in timing the purchase and sale.

You will need a place to stay if the purchase completes a day or two after the sale. In this case, you can stay with relatives or friends. However, if it takes longer than a few days, you can negotiate with the buyer to let you stay in the house. Sometimes, buyers will even offer to allow the seller to stay without having to pay rent.

Will Buying and Selling a House at the Same Time Suit You?

Whether buying and selling a house at the same time will work for you depends on several factors. You need to consider your financial health, timeline, the housing market, etc. Here are some of the questions to ask yourself before making a decision:

• Can you afford it? Can you handle two mortgage payments simultaneously and maintain both homes along with the taxes and costs that follow it?
• Is the market competitive? In a hot market, you may not be able to find a house fast. In this case, it may be better to sell first to get more money and postpone the purchase until the market calms down.
• When do you need to move? If you’re on a tight deadline, you may have to buy a new home before selling your old one.
• What is the condition of your current house? Does your home need a lot of repairs and improvements, or is it all set? If it needs more work, you’ll have more expenses, a longer time on the market, and a lower sales price.

Skip the Hassle

Buying and selling a house at the same time is possible, and in some cases, it’s the best option. However, there are many things to keep in mind when trying to sell and buy simultaneously, such as timing and financing. If you don’t time everything right, you risk ending up homeless. And if you don’t have your finances in place, you simply won’t make it.

Fortunately, there’s a way to skip all the hassle. That’s where SleeveUp Homes comes in. We will buy your house as-is for top dollar, leaving you with enough money to finance your next home without worrying about different loans and conditions to be met. Just request a no-obligation cash offer to see how much you can get, and then decide.

Author:

Cesar Gomez , Broker /

Cesar has worked as a real estate agent and broker in the southern California region since 2013.

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