Let's face it over the past couple of years a homeowner could put their home on the market
and be confident that they would receive multiple offers and close quickly for
very little effort. Those days are over. Now with the Federal Reserve hiking interest
rates to 2008 level, we've got a whole new market. Seller’s today who have to move are grappling
with the decision on weather to sell their home first or buy first.
Let’s look at the Selling first.
Homeowners today have a substantial amount of equity in their home. According to ATTOM Data
Solutions, about half of all mortgage holders are considered “equity rich,”.
That means their loan balance is less than 50% of their property’s estimated
market value. So selling first likely means you will have a large down payment
on your next home which will make your offer more attractive. Plus, you won’t have the burdened of two
mortgage payments.
Of course,
the downside is you will likely need temporary living situation until you find
and close escrow on your next home. You
may also have the option of renting back your home after it closes but
usually a buyer’s lender will allow no more than a 60 days rent back. You can also expect to pay the new owners
PITI (Principal, Interest, taxes and insurance) payment for the rent back time frame as well.
Okay that’s the pros and cons of selling first, let’s now take a look at Buying first.
Buying your next home gives you the Peace of Mind of knowing where you're gonna live,
scheduling the movers and only packing and unpacking once. You can also pick the time of year that works
best for you and your family.
Of course, buying first means that you need to have the cash at your disposal to finance that
next purchase usually that means you need the funds for a down payment, closing
costs, moving fees and other expenses that come with real estate transactions. You'll also have to prepare yourself for
possibly carrying two mortgages should your old house not sell as
quickly as you had hoped.
Another popular option for homeowners looking to buy before selling is opening a home equity
line of credit this allows you the ability to draw funds from the equity in
the house that you'll be selling to purchase your next home. In order to make this a possibility you're
gonna want to reduce your debt to income ratio making you attractive to lenders.
One last option- Renting your home out instead of selling it.
Renting the house out instead of selling might make sense depending
on what your mortgage is and your local rental market . If the rent you can generate will cover all
or part of the mortgage as well as insurance, taxes, maintenance costs and so
on. This option might be attractive to a homeowner who wants to move back in
the future.
