Moving can be challenging when you have to sell your old home and buy a new one. The ideal situation is that the first home sells immediately, and you can use the money from that sale toward the new house. Sometimes you also face a deadline for your relocation, such as starting the school year or starting a new job. What happens if a glitch occurs? What if you find the new home of your dreams, but your old one hasn’t sold?
Fortunately, some options exist to help tackle timeline challenges when juggling house buying and selling.
Offer a Contingency Contract
One way to handle when you find a new home before your old one has sold is to include a sale and settlement contingency in your offer to buy the new house. Your bid on the new home is contingent upon someone else purchasing and closing on your old one with a contingency.
The contingency prevents you from carrying two mortgages; the downside is that some sellers are reluctant to accept contingency contracts. When sellers do accept contingencies, they will continue to get other offers. If they receive another excellent offer, you’ll likely have only a day or two to either agree to buy the home without the contingency or lose it.
Bridge loans are designed to bridge the gap between selling your old home and buying a new one. They temporarily finance the down payment on the new house and are secured by the equity in your old home. They provide flexibility.
On the other hand, the loans are designed to be paid off quickly; however, if the home doesn’t sell and you can’t repay the loan, you could lose your home. You’ll need sufficient equity in the old house and excellent credit scores to qualify. You’ll also need a low debt to income ratio. For most lenders, that means that your monthly obligations, including the mortgage, will need to total considerably less than 28 percent of your gross income.
Home equity loans and HELOCs
Another alternative is to obtain a home equity loan or HELOC on your old home. Home equity loans provide a lump sum and typically have a fixed interest rate, while HELOCs are a revolving line of credit, generally with a variable interest rate. These loans also use your old home as collateral; however, the repayment term is typically five years or longer. The downside is you could end up having to pay two mortgages at a time, and you’ll also need a solid credit score and sufficient equity in the home to qualify.
Become a Landlord
Another option, especially if you don’t need cash from the sale for a downpayment, is to rent out your old home. You can use the rental income to pay the mortgage on the old house until you are ready to sell or continue to use the income long-term, depending on the circumstances. One downside is that some mortgages do not allow you to rent your home; some homeowner’s associations do not allow this either.
The chances are you will need flexibility with your move. Find a moving company that offers storage answers to apply to your unique moving situation. You might need to store your household belongings while you sell your current house or perhaps store your things while waiting for your new place to become available. Look for a moving company that can fulfill those storage service needs. Ideally, your moving company can store your belongings at their convenient storage facility and retain your belongings on-site until you’re ready to move. Then when you’re prepared to retrieve your stored belongings, the professional movers will finish moving them for you.
The Right Movers
We can help with your moving and storage requirements. Contact us today. We can provide you with a quote for your upcoming move.