Which came first, the chicken, or the egg?
When you are buying a home, and you have another home to sell, you’ll find yourself in the “chicken or egg” predicament:
- Should you buy first, and then sell? or,
- Should you sell first, and then buy?
And it isn’t complicated, especially if you know the options that you have at your disposal. Let’s look at the first option: buying first
Buy a home first
To buy a home first, you must qualify to buy the new home while still making payments on your existing home. Also, you must have enough cash available for the down payment.
To see if you qualify to carry both loans, and if you can get a loan with your existing cash, the first thing to do is to call your Mortgage Lender and get a pre-qualification letter.
If your lender says that you qualify to buy another home without having to sell your existing one, the benefit of buying first is that it’s a more relaxed move directly from your existing home into the new one.
The downside of buying first
The downside of buying first is that you run the risk of not selling your existing home right away and you could have to make payments on both homes for a while – and that could get expensive.
So if you’d rather not take the risk of making double payments, or if you don’t qualify to buy without selling your existing home, then your other choice is to sell first and buy second.
Sell your home first
Selling first frees up your cash for a down payment, and it also makes it easier to qualify for a mortgage. But if you are in a buyer’s market, it could take a while to sell your home for the price you want.
However, if you are in a seller’s market, it might be challenging to find a home to buy that meets your needs. And if you can’t find a home that you want to buy, and you have already sold your existing home… then you need to have a Plan B of how to handle that gap.
Fortunately, there are several strategies that we can use to address that potential gap in home ownership. These strategies include: seller contingencies, occupancy agreements, among others. But those details are for another article.
The bottom line is that buying a home while selling an existing one requires good planning and coordination – and it depends entirely on your particular situation.
What is best for your situation?
- Buy a home first? or
- Sell your existing home first?
It’s a bit like the chicken and the egg, isn’t it?
Contact us and let us know what your future moving plans are, so that we can help you craft the right buy and sell strategy for your needs.
Image by Marktee on flickr