Here are five situations in which selling your current home before purchasing your next one will make for an improved real estate experience all around.
In today’s video, I’ll detail five situations where selling your current home before buying your next one is the right move.
1. You don’t want to carry two mortgages. The most painless way to juggle two transactions is buying your new home first, giving yourself time to get situated in it, and then selling your previous home afterward for a great price. Unfortunately, it seldom happens that way. Instead, you wind up with two mortgages, and that’s a heavy financial burden to carry all at once. Selling first will prevent this from occurring.
2. You don’t qualify for two mortgages. Referring back to situation No. 1, let’s say you do want to take on two mortgages. The problem is you may not qualify. A lender won’t account for the fact that you’re looking to sell one of the homes; from their vantage point, you’re simply applying to buy a second home. So they’ll look at your debt-to-income ratio, and lenders stipulate that this has to be less than 36%. That’ll be hard to pull off if you’re juggling two mortgages.
3. You’re buying in a competitive market. Buying first means you’ll need to put your best foot forward and make a strong offer. Since the home you’re living in has yet to be sold, your offer will likely need to come with a contingency. That alerts the seller that your offer simply isn’t that strong, which won’t bode well in a competitive market.
4. You’re selling in a sluggish market. Maybe your area’s market is somewhat slow or altogether stagnant and homes are hardly selling like hotcakes. If you buy first, you’re almost guaranteed to be stuck with two mortgages for a while, and you won’t truly know what your affordability will be without having the gains from the sale of your own home.
5. You’re not ready to commit. Let’s say you’ve owned your home for a number of years now and transitioning into another might only mean being tied down for another three, five, or even ten years. If you’re unsure about that, you might be better off selling first and then renting in the short-term—especially if the market may soon be hitting a bit of a dip and prices are falling.
"Selling your home first will prevent you from experiencing the heavy financial burden of carrying two mortgages at once."