Selling your old home and buying a new one takes coordination. If you sell your house too quickly, you’re homeless! You’ll have to put your belongings in storage and either check into a hotel or stay with generous friends or family. But if you buy a new house before your old one sells, you might end up juggling two mortgages (if you get approved for the new loan at all). Unfortunately with real estate, these situations are very common. It’s extremely unlikely that you will sell a house and buy a house within the same day (or even the same week). Your odds for success if you use a real estate agency though.
The best option is to sell your house first. Although this may leave you feeling stranded (especially if you don’t live near friends or family), it will give you the money you need to buy your new house. To make the best of it, try to find a temporary apartment to rent or stay at an inexpensive (but comfortable) hotel. You might also consider working with the buyers of your old home. If they’re flexible and you explain your situation, they might be willing to let you rent your house, funny as it may sound. To do this, you’ll need to draw up a contract, set a time limit (a period of 30 days is fairly standard), and calculate the cost for rent. However, be aware that if your house has increased in value, paying the buyers’ costs (mortgage, property taxes, utilities, homeowners insurance) as rent might be much more expensive than you’re used to paying.
If the situation rolls the other way and you buy a new home before selling your old one, your financial situation might be direr. First, you’ll need to qualify for a second mortgage. As long as you have a healthy credit score and secure household income, most lenders will be happy to help you. Although mortgages have a 40% debt-to-income ratio, in this situation most lenders will allow 50% or 55%. To help pay the down payment on your new place, you may need to tap into your home’s equity (though you must plan to do this before your home is on the market). You could also take out a bridge loan or borrow from your 401(k).
It’s a difficult situation and you can always hope for the best. But if your dates don’t quite line up, use these buying and selling tips to bridge the gap or make it through the overlap.