The Buying and Selling Dilemma
Updated: Feb 21, 2022
Guest Author: Kelle Walters NMLS 253779, Senior Mortgage Banker at Flat Branch Home Loans, Columbia, MO
Ready to buy a home but you have one to sell first? But your best-cast scenario is to close on your new home and move into it before the old home sells? Flat Branch Home Loans may have some great solutions for you. You may have heard of the bridge loan, but we have other creative options that could fit your financial goals and still allow you to buy a new home before selling your existing one.
Most homeowners have equity in their homes and want to use that equity, once it becomes liquid, to put down as down payment funds on the next house they buy. Whether that is a ‘move-up-we’ve-outgrown-our-house’ purchase or a ‘downsizing-to-just-the-space-we-need’ purchase, using those down payment funds can help keep the new monthly mortgage payment at a comfortable level that fits their budgets and goals.
However, in today’s market it seems hard to find a seller willing to take an offer contingent upon the sale of your existing home. That keeps you from accessing your equity as liquid cash for down payment and moving purposes. A traditional bridge loan or home equity loan can be used, but that involves a separate loan closing transaction as well as another set of closing costs. You will already be closing on a 1st mortgage home loan when you purchase your next home and so paying a second set of closing costs to access your equity through a bridge or HELOC* can be undesirable.
There is a way that you can purchase your new home right now without selling your old home and without accessing your equity beforehand. Ideally the best way to ensure you can do this without any hiccups along the way is to:
Complete a loan application and provide the documents necessary to get pre-qualified.
Have access to at least a 5% down payment (from an acceptable source**) without having to sell your existing home to get those funds. 5% down is based on the sales price of the new home.
Be willing to pay both the old mortgage payment and the new mortgage payment for at least 1 month or up until your old home sells. If you did the traditional bridge loan, you’d be doing this anyway.
Because Flat Branch Home Loans services most of its conventional loans we can walk you through this purchase process as well as a post-closing process that will help you reach the same mortgage payment you desired as if your old home had sold at the same time as your purchase. It’s one transaction and you will only pay one set of closing costs. You won’t have to refinance after you purchase your new home either - and the bonus - you get to keep the same rate you locked in and closed with during the purchase process.
Ready to take the next steps to your dream home, or to downsize to that perfect space, call us today!
*HELOC is home equity line of credit.
**Acceptable sources can be your savings/checking account, a gift from a family member, a loan against your 401k as well as other sources. Check with us to know if your down payment source fits with loan guidelines.