This article will apply to you if this is a question you are asking yourself: I currently own a home, but I want to sell and buy another one. Should I buy first and then sell after, or should I sell first and buy after?

Someone home owners sell their home and in the end don’t end up buying a home and look for a place to put all their things and a place to live. This can be a terrible situation to be in. Even worse would be, if you buy a home and don’t end up selling the existing home. You would need to take care of both mortgage payments. So, this shows both steps are risky situations to be in. However, it depends on your situation.

Situation 1: You Have Good Income & Enough Savings

In this situation you would have enough money to payout two mortgages and make an initial down payment without taking any equity from your existing home. Once you buy your new home and have all the paper work done, you should put it on the market. It is wise to put a closing date on the existing home, after the closing for your new home because this allows you to stay at your current home till its sold.

Situation 2: You Have Good Income & Not Enough Savings

In this situation you have a good income which will allow you to pay up two mortgages, but you do not have enough money to pay that initial down payment. A solution is to take some equity from your current home. The best way to do this is to get a home equity line of credit, this way you have some time to look for a good house, and buy it. Once you sell your old home, you can use the money to pay off the mortgage/debts. If you are aware of your situation before hand, it is best to apply for a home equity line of credit. It will be extremely hard to get a home equity line of credit if your house is on the market.

Situation 3: Not Enough Income or Savings

In this case you don’t have enough income or savings. You can’t pay for two mortgages, nor can you buy the home. This is the case where you should sell your home before you buy. When you have the contract to sell your existing home, the loan lender will not look at the old mortgage and whether you can pay it. Now, this will start from scratch like a new home purchase. The sale of your home will pay for the new home. Although in the meantime, you would need to pay certain fee’s. For this you would be available to get a small loan from the bank which would be paid when your existing home is sold!

Some Tools
Home Equity Loans - The Basics - Part 3
Home Equity Loans - The Basics - Part 2
Home Equity Loans - The Basics - Part 1
All Types of Mortgage Loans
Mortgage Calculators & Tools

3 Comments »

1. 

   Great article. Very very true. I was in the situation number 2, and I had done the same.

   Comment by Macice — January 11, 2009 @ 5:24 pm

2. 

   Many people fall into traps. They don’t take the time to consult with professionals. This is where we help educate the general public on small topics like this.

   MortgageTonight.com

   Comment by Mortgage2Nite — January 11, 2009 @ 5:29 pm

3. 

   I like the way you give out the different options which is a great way of expressing un-opinionated advice. I will bookmark this post for future reference.

   yanjiaren’s last blog post..Newsflash: get 1,000 free shares before they all go!

   Comment by yanjiaren — January 20, 2009 @ 11:11 pm

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