Dave,
We are getting ready to sell our house and buy another in a different part of town. Do we need to talk to our bank before looking at homes? We already have an idea of what our price range for the new house will be based on our current home’s value. Another question: do we need to sell our current home before buying another, or can it happen simultaneously?
Love reading your column each week.
Doug, Grand Junction
Doug,
This is a great question. I believe it’s a good idea to talk to your lender before you start looking for a new home….especially since the interest rates have gotten so volatile. This is going to help you determine your buying power and give you and your agent an accurate idea of what you can afford. Your lender will review your financial situation, including your income, debts, and credit score, to determine how much you can borrow. They will also be able to give you an estimate of the monthly mortgage payments based on the loan amount and interest rate. Keep in mind that “what you can afford” may not be the same as what you are “comfortable affording” so this information is vital in your home-buying process. This information will help you make informed decisions and set realistic expectations when you start your home search.
Regarding selling your current home, it is possible to sell and buy a new home at the same time. This is known as a simultaneous closing and we do it, and are successful with it, more often than you might think. This can be a bit more complicated than selling first and then buying, but it can also be more convenient as it allows you to move directly from one home to another without having to rent or live with friends or family in between. Trust me, staying with my mother-in-law for the weekend is one thing and very enjoyable, but being there for 2-3 months would not be a picnic for either party. I love to jokingly throw shade at my mother-in-law, but truth be told I am sure my habits are as annoying to her as hers are to me…not to mention our pets… that’s a whole other story! LOL
Keep in mind that a simultaneous sale can be more stressful, but avoiding the dreaded “moving twice” does make this a very appealing option. If you choose this route it is important to know that you will be making offers on your new property that are “contingent” upon your current home selling. Being a “contingent” buyer certainly does not put you in a position of strength when making an offer….UNLESS you already have your home Under Contract. In the case where your home is already under contract, your bargaining power increases significantly as you will be seen as a ready buyer. If the market continues to move on the slower side you might find some sellers receptive to the idea of a “contingent” offer. However, when it heats up again you are likely to have difficulty finding a suitor. There is no doubt that selling your current property first puts you in the most powerful position as a buyer, but it does put you back into the potential “move twice” scenario if you can’t find a good replacement quickly. Your real estate agent should be able to help you navigate this process, but the coordination and timing of the two transactions are crucial for the process to be a success.
I hope this helps and good luck with your home search!