What if you find your new home before you sell the home you live in now?
I cannot tell you how many times I have heard someone ask that question. There is no doubt that this is NOT the ideal situation. However, sometimes things don’t go exactly the way we want. Remember…
We don’t have problems…
So we have to find ways to turn these situations into a happy ending for you. You don’t want to hesitate making an offer on your dream home before you have sold your home. Especially in today’s market. So don’t worry because it is possible to deal with this situation.
Let me explain what happens when you find the dream home that you want to buy before you have sold your current house.
It is possible that the seller of the home you want to buy will consider an offer that is contingent on your current home selling. However, while this is possible, it is not NOT very probable. Any and all contingencies in an offer make it weaker. And this type of contingency makes an offer very very weak.
But if your home is ALREADY under contract, this is an option for you. I am NOT saying the seller receiving your offer will think the same thing though…
A Bridge to Somewhere
Another option for this situation is a bridge loan. This is type of loan will wrap your payments for your current home and your future home into one loan. They usually last between six and twelve months.
This type of loan usually involves a small fee and you will also be responsible for the closing cost on the mortgage on your next home. This is not the best option for everyone and some people may not be able to obtain this type of financing.
Robbing Peter to Pay Paul
I really hate to recommend this but sometimes borrowing from your 401K is possible. Well, that is IF you can. If you can, then you will borrow the money from your 401K. Then you repay it when you sell your current home. Like I said, this is not something I normally recommend. You MUST research first so that you are not at risk of incurring any penalties with the IRS. I strongly suggest talking with your accountant and tax person FIRST!
Taking it Personally
Maybe you can get a loan such as a personal unsecured loan. Of course, there is a downside to this solution. These types of loans usually have high interest rates. And this is a short term loan that will only last for a few years. Plus, you will have to include the payments that you are making on the personal loan when you are qualifying for a mortgage on your next home.
Last but not least, is renting your current home. If your mortgage will allow you to rent your current home AND the rent will cover the payment, then this is an option. However, you really have to consider the worse case scenario of getting a BAD tenant. Again, this option is NOT possible for everyone but it is an option I should mention.
Why Buy Before You Sell?
I know plenty of people are asking themselves if buying before they sell their current home is even an option. There are some good reasons why to consider this though such as:
- You may find the home of your dreams
- It is a unique once in a lifetime opportunity
Like I said, this is not the ideal situation. Sometimes things don’t go in the order we want them to. Having the knowledge, experience and creativity to find solutions is essential when buying or selling real estate.
There are other possible solutions to this type of situation but I can’t tell you all of my secrets can I?