Financial planner gives 3 ways to make buying new house before selling first less frustrating

Financial planner gives 3 ways to make buying new house before selling first less frustrating

How to Successfully Buy a New Home Before Selling the Old One

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Buying a new home while still owning the old one can be a daunting and challenging process. However, with proper planning and expert advice, it can be a smooth and successful transaction. In this article, we will explore practical strategies and insights to help you navigate this situation.

The Dilemma and the Need for Solutions

Two years ago, at the peak of the real estate market madness, I found myself in a dilemma. I needed to sell my first home in order to afford a new one. However, this presented a significant challenge. Not only did I require the proceeds from the sale as a down payment, but I also couldn’t afford to carry two mortgages simultaneously. Additionally, finding temporary accommodation during the transition was a concern. Compounding the issue was the difficulty of finding a buyer willing to accept a contingency offer. It seemed like finding a solution was impossible.

This frustration led me to believe that there must be others facing similar challenges. Therefore, I sought out the expertise of Certified Financial Planner Tammy Trenta, the Founder and CEO of Family Financial, LLC, to provide valuable guidance to people in a similar situation.

1. Making a Plan Ahead of Time

According to Trenta, the ideal solution to buying a new home before selling the old one is to plan ahead. In retrospect, I realized that I should have started preparing for this transition much earlier. By incorporating your new house plans into your budget ahead of time and saving towards a solid down payment, you can demonstrate to lenders that you are financially ready for a new mortgage.

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Trenta recommends various strategies to bolster your financial position for mortgage approval. Apart from regular savings, considering accessing your 401(k) funds. Although this option comes with tax implications, it can provide the necessary cash for buying before selling. Another viable alternative is requesting a loan from parents or grandparents who can afford to lend you the money. It is important to comply with tax regulations and provide gift letters when using this option. If you have access to such support, ensure the funds are in your account for a few months before applying for a mortgage.

In certain real estate markets with less competition, a contingency offer may be a viable route. When faced with multiple offers, sellers are often reluctant to accept a contingency, as it introduces uncertainty. However, if a house has been on the market for a while without attracting offers, any offer may be appealing enough to warrant consideration.

2. Making it Easier to Sell Your Home

To increase the chances of selling your first home expeditiously, there are several strategies you can employ. Trenta suggests investing strategically in renovations and home improvements to enhance your property’s value and desirability.

A cost-effective approach recommended by Trenta is staging. If your home is empty, adding a few tasteful pieces of furniture can help potential buyers envision the purpose of each room. Additionally, if you are still living in your house while trying to sell it, simple enhancements like adding dark mulch to flower beds can significantly improve curb appeal.

3. Seeking Expert Advice

Navigating the complex process of buying a new home while selling the old one requires expert guidance. Trenta strongly advises consulting with a registered investment advisor to obtain objective advice. It is important to remember that lenders are essentially salespeople, and having an unbiased perspective can be invaluable.

Given the substantial increase in mortgage rates over the past 18 months, it is crucial to explore different mortgage options to make your new home more affordable. Lower interest rates, down payment assistance programs, and favorable terms can significantly impact your overall financial situation. An investment advisor is well-equipped to guide you through these choices, ensuring you make informed decisions.

Conclusion

Buying a new home while still owning the old one is undoubtedly a challenge. However, with careful planning, enhancing the appeal of your current home, and seeking expert advice, it is possible to navigate this situation successfully. By preparing ahead of time, bolstering your financial position, and receiving objective guidance, you can increase your chances of a seamless transition. Remember, buying a home is a significant investment, and having an expert by your side can make the process more manageable and rewarding.

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