Many homeowners assume that if they want to purchase a new home, they will have to sell their existing home first. Surprisingly, that’s not necessarily true.
So why might you want to buy first?
- You’ve found the home of your dreams. Maybe you weren’t even looking, but suddenly, there it is: the house that has everything on your must-have list, and a few extras as well. You know that if you don’t make an offer, someone else will scoop it up.
- Your current home isn’t ready to sell. Your Realtor has advised you that your home will be worth considerably more if you give it some serious TLC. Maybe that means pulling up the wall-to-wall and refinishing the wood floors. To do that, you’d have to move out anyway; moving directly into your new home saves money on a rental, on storage for your furnishings, and on the cost of moving twice.
- Your current home is paid off. If you are no longer making mortgage payments on your home, the pressure to sell first is much lower.
- You have cash for the down payment on your new home. If you have the funds to cover your down payment as well as a few months worth of mortgage payments on both residences, you may have the flexibility of buying without selling first.
- Your debt-to-income ratio is under 43 percent. One of the benchmarks for borrowing is your debt-to-income ratio (DTI). It’s calculated by dividing all your monthly debt payments by your gross monthly income. If you include the payments for both mortgages and your DTI is still under 43 percent, you have many more purchasing options.
- You want to avoid the stress of being a renter for an indefinite period of time. Selling your current home is no guarantee that you’ll find a new one quickly. Especially in a competitive marketplace, you and your family could be displaced for months.
- You are relocating and have to move before your home is sold. Waiting for your home to sell simply is not an option.
Whatever your reason for buying before you sell, your smartest move is to talk with a mortgage banker right away. You may be surprised to learn how many options you have. Some of them include:
- A low-down-payment loan
- A piggyback second mortgage, or home equity line of credit (HELOC)
- A bridge loan, or swing loan
There are other options and your local Sente Mortgage loan officer would be happy to discuss them with you. Before you make an offer on a new home, give us a call.