Buy, or Sell, First?

When considering to sell our home and buy another, a common question that we all encounter is "Do I need to buy, or sell ,first?".

In the past we've been able to make an offer to buy, with the contingency that our current home sells first. In this market, that wont fly. With multiple offers on a home, your offer needs to stand out and be competitive. This means, as few contingencies as possible. Let's look at 3 options to get around this "standoff".

Option 1 - Lease back

You will put your home up for sale and remain in the home even after it has sold to the new owner. You'll remain in your home while shopping for the next. Now you have the money made from the sale to use as a downpayment on your next home.

Option 2 - Recast

Use a standard conventional loan to purchase your next home (minimum 5% down needed). Once your current home sells, use those funds to pay down the loan. Don't just apply this $ to the principal, but instead "recast" the loan. This essentially readjusts the mortgage and drops your payment as if you originally started out with that lower loan amount. Also eliminating PMI.

Option 3 - Bridge Loan

A lender will loan you a portion of the equity in your home. You pay interest only on this amount. The funds can be used for a downpayment, closings costs, etc. on your next home purchase. This debt is not counted in your debt to income ratio for qualifying on the new loan.

There are pros and cons to each of these and your particular situation will determine the right method. We can chat high level, and also bring in a lender to strategize further. 

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