How Selling a home to buy another works

If you’ve ever bought a home before, you are likely to be somewhat familiar with the home buying process even if you purchased your property 15 years ago. What you may not be familiar with is how to go about buying a home if you need to sell your current residence. As of this moment I find myself working with four families in that situation and thought it would be useful to others if I shared their main concerns and addressed them one by one.

Q: Can I get pre-approved to buy before I sell my home?

A: Yes. Not only yes but a must! The lender will take into account you are selling your home and will obviously won’t count it against you. The reason I say this is a must is because you may think the fact that you currently have a mortgage means you won’t have a problem securing another right? Wrong! Lending guidelines change constantly so you want to have 100% confidence that you will not only be able to purchase a home on the other end but that you are comfortable with the payment and qualify for the type of property you envision moving to.

Q: What if I sell my home and haven’t bought one yet?

A: The important thing to realize when you are selling a home is that you and you alone control the terms of the sale. Setting specific conditions on the sale of your property is crucial based on the level of risk/reward you are willing to take. Dictating to potential buyers that you must find a replacement property in order to sell yours limits your risk of becoming homeless or forced to find temporary housing while at the same time limits your potential profit from the sale since not everyone will be comfortable waiting for you to find that special home therefore reducing the number of buyers competing fir your home. The decision is entirely up to you.

Q: Can I buy a home before I sell mine?

A: Of course you can provided that you are able to support both mortgages and have the necessary down payment for the purchase. Most homeowners need the proceeds from the sale of their property to put down on the next and typically do not qualify for both mortgages at the same time.

Q: I have a VA loan, can I use another VA loan to buy?

A: Yes. VA allows you to use you VA loan as many times as you’d like with the only exception being you can only have one VA loan at a time. In other words, if your current residence is secured by a VA loan you would have to either sell the property or refinance the loan to anything other than a VA loan for you to be able to buy a property with a new VA loan.

Another important factor to be aware of when selling your home to buy another is to pay special attention to all the timelines involved in both sales. If both homes are scheduled to close escrow on the same day which is typical, you and your real estate agent would be wise to request a couple days after close of escrow to maintain possession to allow you to move into your new home. Remember, without that, the new buyer becomes the owner of your property virtually at the same time as you are of the new home so good luck packing and/or moving everything out in a few hours.

The Bottom Line

Selling property to buy another has its complications but there are few things in this world that don’t. Choosing the right real estate agent can make it a much smoother transition. Conversely, choosing the wrong one can lead to a bumpy road and possibly temporary homelessness.