Trying to sell your current house and buy a new one in Milwaukee, Wisconsin at the same time is a difficult task. Selling and buying properties simultaneously tends to be stressful and you are risking a lot. When buying and selling houses on the same day, you have to think about a lot of things, such as timing, two mortgages, taxes and the possibility that your home selling deal won’t fall through as you’ve planned.
But, it isn’t impossible. Below are things that you need to pay attention to if you want to know how to sell your current house and buy a new one at the same time.
Understand your financials
Before you make the first move on selling and buying a home at the same time, you should put everything on the paper and make the calculations. For how much will your old house sell on estimation? How much money will you spend on the repairs, advertising and other expenses that come with selling your house? Have in mind that you might not know the exact expenses until later on, as, according to Mc Kinney Realty, you shouldn’t start any repairs until 6-8 weeks before listing, and it isn’t recommended that you start preparing your home until 4-1 week before listing. Until all of that is complete, you should have some extra cash prepared for unexpected expenses.
If your house still has a mortgage – how much equity – in other words, remaining payments – do you have? Also, keep in mind that you won’t be able to access the existing equity before the sale closes.
At the same time, there are certain tax breaks and deductions for people who own second home, whether it’s for their own use or for renting or investing. The Tax Cuts and Jobs Act (TCJA) impacts how much money you can save.
Think about the market
One thing that you need to consider is the current housing market. You should stop thinking only like a seller and try to approach the task like a buyer as well, especially if you are planning on buying a house before selling your own.
This means that buying in a seller market isn’t a good thing if you are planning on buying a house in Milwaukee. The inventory tends to be low and the prices are higher because the competition is bigger. Also, keep contingent offers in mind. Even if the money is in escrow, a buyer who has not yet sold his property is looking less responsible than a buyer without a house at all.
On the other hand, if you want to sell your current house in a buyer’s market, the process can take more time so it is a good idea to wait to sell your old home before buying a new one. A good idea is to include a financial contingency, so you will be able to annul the made deal. This way you are risking less.
Make sure that you are qualifying for mortgage before selling house
Often times, lenders aren’t willing to just give away money for someone’s second home when they already have one home and one mortgage to pay. Their decision will depend on your mortgage payment history and your credit, as well as your savings and previous behaviors. In short, in order to get a bank loan or credit for buying a house before selling your own, you’ll have to provide proof that you can cover all the costs. Some factors that you need to consider before applying for a second mortgage are:
Credit report and FICO score
Your credit report is a card that shows lenders what are your habits when you’re managing your debt, and your FICO score represents your consumer credit risk. Be sure to constantly check your credit report to make sure that you’ve reported everything correctly, so there are no mistakes that can drag your score down.
Your debt-to-income ratio counts how much debt you have compared to your income. Your DTI can’t be too high, as that will make lenders less likely to work with you.
Income and assets
If you want to qualify for a second mortgage, you will most likely have to have at least two years of steady income.
Down payments are typically higher for second homes than ones on primary residences. Also, if you put less than 20% down, you may be required to have PMI to protect the lender if you fail to make your payments on time.
And even if you have a mortgage and want to sell your current house and buy another house, and the bank allows you the loan for the second home, you should still ask yourself – are you sure that you want a second mortgage on top of your first one? Also, keep in mind that at the same time you’ll have to cover the costs of two insurances, two pairs of utility bills, two maintenance costs and all of the other expenses that come with owning a house.
Don’t buy before you sell
Buying a new property before you sell your current house is usually not a good idea. Sure, buying a new, bigger property before selling your old one would make your move easier. You wouldn’t want to end with double mortgage on your hands, would you? Let’s not even mention that you may not even be able to qualify for a double mortgage! Nothing guarantees that your house will sell according to your plans. Still, there is a traditional trick to selling and buying a home at the same time and that is to make the purchase contingent on the sale of your current house.
Think about the timeline
If you are planning on buying and selling house in the same day, you should think about negotiating the timeline of the closing process and not only the price. Don’t be afraid to insist on closing the deal on both the property that you’re buying and the one that you are selling at the exact date that is good for you. For example, if a person you’re buying your new house from doesn’t want to close the deal on the exact date, maybe you should go and look after some other opportunities. You don’t want to end up without a home because the dates weren’t corresponding with one another!
Have a backup plan
No matter how much time you’ve spent on planning how to buy a house before you sell your current house, sometimes plans tend to go south. Maybe the transaction didn’t go according to schedule, or the bank denied your buyer’s loan. This is why it’s important to have contingencies in your contact, so you could reschedule everything without any problems – or simply walk away with minimal financial losses. However, having a backup plan is always a good option.
Some options for backup plans are:
- Finding a short-term rental, so you can have where to stay if you sell your home but aren’t able to buy a new one on time. This will cost some money, but it’s better than staying homeless.
- Ask the buyer to do a rent-back agreement, so you can stay in your current home even after closing for some time – all the while paying rent to the property’s new owner.
- You should cover the costs of your new home with savings, credits or a bridge loan over the short-term. However, if you do a bridge loan, you’ll be responsible for making payments on the house whether or when your old property sells.
- You can rent out your current home until it sells out, so you can have an additional income that will help you cover the costs of owning two houses.
Or you could contact a direct buyer in Milwaukee, Wisconsin. This way, you will be sure that you’ll sell your current house fast, on the exact date that fits your schedule, and you will be paid in cash, which means that there is no need to wait for transactions to go through.