Is it risky buying a new home before selling a home you currently own?

Is it risky buying a new home before selling a home you currently own? There is no simple answer… Knowing and understanding your options can help you make the decision that’s right for you. There can be several advantages to buying a new home before selling your current one, so we’ve broken down a few things you should consider.

Timing Your Move
You can take your time with the buying and moving process. You’ll have more time to shop for a new home that has the features and location that you want. Then once you buy your new home you can move in at your own pace, and put your current home on the market when ready. buying a home, selling a home

On the other hand, if you sell your current home before buying, you face the possibility of not having a place to live. There are options. You could rent until you buy a new home, including the possibility of renting your current home from the new owners. Or, once you have an offer, you can begin shopping for your new home and try to coordinate closing dates. While not impossible, this would take a bit of finagling and a lot of luck.

Financing Your Move
If you still owe money on your current home, then you’ll have to be able to afford two mortgages until your current home sells. How quickly that happens depends on the housing market in your area. Having two house payments will limit your purchasing power for a new home.

Selling before you buy gives you the advantage of knowing the exact amount you can put toward your new home purchase. While this might give you more peace of mind and buying power, it might mean missing out on homes you want while waiting for yours to sell.

Ask a Professional
Your real estate agent can estimate the value of your current home and how quickly the current market is moving. They can also help you find information about neighborhoods you are interested in moving to and how much buying power you’ll need for the home you want.

A mortgage lender can help you figure out if you can afford to have two mortgages. They can also inform you about how to use equity in your current home to help with the down payment on a new home.

Whether you decide to buy first or sell first, you can make the process easier by being prepared and able to take action when the right opportunity comes along.

Have more questions about buying a new home before selling your current one? Feel free to contact me for more information.

Top 4 Mortgage Questions

While you may want to start searching for your dream home right away, the first step in preparing to buy a home is understanding how much home you can afford. To know this out, you should get pre-qualified or pre-approved by a lender, who will tell you the maximum amount you can mortgage. This will help you start searching within your price range. Now it’s time to prep for your meeting with a lender, so make sure you know the answer to the following 4 mortgage questions

Who Will Be on the Mortgage?

If you are searching for a home not just for yourself and you have a partner involved, it is important to understand whether just one of you or both of you will go on the mortgage. In some cases, one partner may have better credit or financial standing than the other, so it may be beneficial to have just that one partner on the mortgage. On the other hand, combining two good credit scores and incomes can help increase the amount of the loan.

What Is Your Monthly Budget?

It is important to understand what your monthly budget will be when owning a home. While you may be able to qualify for up to a certain amount on your mortgage, the monthly payment may be more than you can really afford. That is, it would leave you cash poor. Remember that you want to buy a house but also maintain a lifestyle you are comfortable with. Have in mind a monthly payment amount that would achieve this, and you can see what mortgage amount that could get you.

Do You Have Reported Stable Income?

Without a regular income, it is very difficult to get a loan of any kind. For a mortgage, it is important to be able to prove that you have a steady income by providing proof of income. This can be in the form of a paystub. The number of paystubs the lender would like to see can vary, but be sure you know how to access these documents so you can provide them. Also, if you are getting paid “off the books” or “under the table,” you may have a difficult time getting a mortgage.

What Does Your Current Debt Look Like?

Take an assessment of what current debt you have and how much of your income it takes monthly. The lender will look at this to get your debt-to-income ratio, which can determine the confidence the lender may have in you as a borrower. If there is a debt you can easily pay off, then do it to free up more monthly income to put toward your future house and mortgage. It is also important to not take out any additional loans until after you close on your house, as this could change the amount of mortgage you can get.

Also, it is important for negotiation purposes to know how much an extra $1,000 on the mortgage would add to your monthly payment.

If you would like me to refer you to one of the lenders I typically deal with, please feel free to reach out to me.

15 Easy Steps for Buying a Home in New Jersey

So, you’re ready to buy your dream NJ home. Congratulations! You have the taken the all-important first step. The rest is not difficult and is outlined below.
Whether you are a first-time buyer, or a repeat home buyer, this is helpful because not only do things change, but the laws and some of the processes and protocols change.

Step 1: Decide where you want to live

Most people already know where they want to live. Others will use various means to determine the area best for them, depending on work, schools, commuting, etc.
Some of the best means for helping find the perfect community for you to call home are:
buying a home

  • Ask friends, colleagues, family. Ask many, not just a few. Remember that everyone has an opinion and it their opinion based on their outlook and experiences which may differ from yours (some people even like liver!), but if you ask enough people you will get some excellent recommendations and notice trends.
  • Search the web. My website has access to home listings, demographics, photos and more. Of course there are many possible resources for information on the web – practically limitless!
  • Drive around. Go ahead, get lost in the side streets, visit the downtown, shop in the supermarkets and shops, have lunch, talk to people, walk about, get a sense of the community.
  • Ask me. I have lived and worked here for nearly all my life. Use me. I promise to give you the straight scoop or to tell you where to get it.

Step 2: Determine what you can afford

Do this early in the process. Online calculators can help or contact me for a list of qualified, competitive mortgage professionals for a no-obligation consult about mortgage financing.

Step 3: Obtain a mortgage pre-approval

Yes, up front. Even if you’re not sure you’re going to find your house immediately. This benefits you:

  • By giving you the leverage of a qualified buyer when negotiating price and terms on the house you want
  • By getting this important but time-consuming step out of the way early on
  • By giving you the opportunity to resolve any financing issues early in the process, thereby reducing stress

Contact me for a list of qualified, competitive and professional loan officers to get this process underway smoothly.

Step 4: Choose your Realtor – Buyer’s Broker

Choosing your Realtor can make a big difference on the outcome of your purchase, sometimes in the thousands of dollars kind-of-difference. Buing a home in NJ is a very large purchase and it is critical that you are represented by a Realtor you can trust to act in your best interests and has the skills necessary to execute your wishes and best interests adequately. Some of the things to look for:

  • Experience – not all real estate agents have it and it makes a huge difference. We all have to start somewhere, but do you really want someone without experience learning via your home purchase? Would you choose a surgeon right out of medical school to operate on you?
  • Buyer Representation – this is critical. You want your Broker to represent you, to guide you and advocate for you. Then in case of dual agency, treat you fairly and per the law. Get a clear explanation on how this works. An agent that can’t explain it clearly cannot handle it properly.
  • Education – experience is a great teacher, and education gives any profession superior understanding. There are many legal, environmental and technological issues that need to be known and understood to help guide you smoothly through the home buying process. Make sure your Realtor is keeping up with the changes.
  • Does your Realtor abide by the National Association of Realtors Code of Ethics? This document provides clear guidelines for a business that can be sometimes confusing. Adherence to the Code ensures you and others are treated fairly.
  • Does your Realtor sell real estate full time? You have too much at stake to hire someone who does this “on the side” and “dabbles” in real estate, even if they are your cousin.

Step 5: Decide on your time-table

Most people find their new home within a 2 week period, depending on area and supply, of course. The average length of time from finding your home in NJ to closing is 60 days. Sometimes 30 or 90 days can be accommodated. It depends on the buyers’ and sellers’ needs and schedule. When do you want to move?

Step 6: Look for your New Jersey home

This is the most fun part of the process. Be guided by your instincts and remember that there is no perfect home, but there is a perfect home in NJ for you at this time, within your budget.
15 Easy Steps for Buying a Home in New Jersey

Step 7: Make your offer

Once you’ve seen all the contenders and you’ve found the perfect house for you, the offer must be made in writing. There is a form contract to be filled out by your Realtor and it includes all the details of your offer: price, of course, but also mortgage terms, deposit amounts, closing date, inclusions, exclusions, inspection contingency and details, etc.

Step 8: Contract negotiations and acceptance

Frequently your initial offer is countered by the seller. At that point, the price and terms are negotiated verbally and communicated through the Realtors from the seller to you and back and forth. Once the terms and price have been agreed to, both buyer and seller then sign and initial the revised contract.

Step 9: Attorney Review

After the executed contract is delivered to buyer and seller, via fax or email or mail, the contract is then forwarded to both parties’ attorneys for their review. The review can take 3 business days, as the contract allows, or 3 hours or 30 days. The two latter options being most unusual. During this period, either party may cancel the contract without penalty or consequence. If you really want the home (and if you’ve gotten this far, you should be excited and happy), then you will want to promote a speedy attorney review and it is up to you, the buyer (as well as the seller) to help facilitate this process. A couple of important points when selecting an attorney to represent you: First, don’t go for the lowest price; 2nd, work with someone who specializes in real estate transactions (would you have the GP do your open heart surgery?); thirdly, select a local attorney who is knowledgeable of the area and any issues that may be local.

Step 10: The contract phase

Once attorney review is completed, you are officially under contract to buy your NJ home. This is when you complete the mortgage processing, including appraisal, scheduling and conducting all your inspections. A note about inspections: you must use a licensed NJ inspector and you have a very short time to schedule, perform inspections and receive your reports, so it would behoove you to schedule inspections very early, usually while still in attorney review. Generally one inspector will inspect the home structural, electrical, plumbing, HVAC and other defects, also arranging for radon testing, inspecting for termites and other pests, and other environmental concerns. Other inspections may be warranted, such as lead paint hazard testing or searching for oil tanks. Since each property is unique, ask me and your attorney and inspector for guidance. Ask me for a short list of inspectors – I attend many inspections and I have the opportunity to see first-hand how each works. I also rely on clients’ feedback in making further recommendations.

Step 11: Negotiate for defects

No NJ house is perfect. While on the inspection, the inspector may tell you the good parts as well as the bad but you should expect the report to lengthy and full of to-do’s. Many are simply suggestions for continued maintenance, appropriate upgrades. Minor issues are to be expected. However, you should generally expect to have a leak-free roof, major systems in working order, and a structurally sound home. If there are major issues such as those mentioned, your attorney and I will work with you and the seller to negotiate repairs or credits.

Step 12: The other details

At this point, your mortgage appraisal has been done and your final commitment should be available (there is a date in the contract by which you must comply and provide the mortgage commitment). Your attorney will then order the survey, title search and flood certification. Call your insurance agent and get the homeowner’s policy in place to begin the day of closing. You will need to have a paid receipt for the first year’s insurance at the closing. Give this at least 2-3 weeks.
making your offer

Step 13: Call the movers and start packing

At this point, I will provide a list of the utility companies so you can be ready to open accounts for gas, electric, phone, cable, water, etc. as of the day of closing.

Step 14: Walk through inspection

You should plan on inspecting the house sometime in the 48 hour period prior to closing. It is important to wait for the sellers to have moved out. Generally, this walk through is conducted just prior to the closing.

Step 15: Closing celebration

Coordinate with your attorney as to how much money you will need at closing. It will have to be in certified funds or bank check or wire, so allow time for this that day. Get ready for writer’s cramp and to finally receive the keys to your new home!

Enjoy your new home!

Congratulations and good luck on your search for your dream home!