Concurrent Home Buying and Selling: Navigating the Process with Ease
Selling and Buying a home in Los Angeles at the same time
In the world of real estate, buying and selling a home simultaneously can be a daunting task. This can become even more challenging if you need to use the proceeds from the sale of your current home to pay for your new one. However, there are several options available to make this process smoother.
Before you start the process, talk to your lender and accountant about your options.
Lower Down Payment Options
One option is to secure a conventional mortgage with a low down payment for your new home. This will allow you to apply the proceeds from the sale of your old home toward the new one once it closes. Additionally, you can have your mortgage recast, meaning the lump-sum payment will be applied to the loan's principal.
Loan on your 401(k) or other investments
Another alternative is to take out a loan against a retirement or other investment account to obtain funds for a down payment. For example, a 401(k) loan can offer affordable interest rates up to $50,000 or up to 50% of the balance, whichever is smaller. This can be beneficial because lenders won't consider this loan against your debt-to-income ratio when determining your eligibility for a mortgage pre-approval. Once your home sells, you can repay the debt against your investment account.
Bridge Loan
A bridge loan is another option that allows you to borrow up to 80% of the value of your property. You can use the funds to pay off the previous mortgage and use any remaining funds as a down payment for a new home. Remember that bridge loans are designed to bridge the brief time between selling the old home and buying the new one, so they are repaid much more quickly. Due to the short duration, the interest rates on a bridge loan may be a few percentage points higher than those on a standard mortgage.
Home Equity Line of Credit
If you already have a home equity line of credit (HELOC) established on your current residence, you could use it to borrow money for the down payment. However, remember that the HELOC must be verified before you list your home for sale, as lenders won't approve the credit line afterward.
Move into a short-term rental or rent a home.
Sometimes, it may be best to sell your home and then move into a rental while you search for your dream home.
You Don’t Need Financing
If you can afford two mortgages, consider purchasing your new home and moving in before selling your old one. This option can offer you peace of mind while buying and selling a home concurrently.
Request a lease back from the buyer or ask for an extended escrow.
Another potential solution for buying and selling a home simultaneously is to request a leaseback from the buyer after selling your home. This allows you to stay in your old home while looking for your new home. However, remember that lenders usually only allow a two-month leaseback period. If the leaseback exceeds this time, the house becomes an investment property for the buyer, leading to higher interest rates. Alternatively, ask for a more extended escrow period to give yourself more time to find your new home.
Timing the selling and buying of a home
Finally, selling and buying simultaneously is possible, but timing is crucial. If you've found your dream home and have an accepted offer on your current one, your realtor will need to time everything perfectly so that you're performing on time. While it can be tricky, it is possible with the proper planning and execution.
Conclusion
In the competitive world of real estate, it is vital to have all the options for buying and selling a home simultaneously. This process can be daunting, but it can be a smooth and stress-free experience with the right approach and support. If you are considering selling and buying simultaneously in Los Angeles and surrounding areas, navigating the complexities of buying and selling a home can be challenging. However, our team is here to help. We understand the nuances of this process and can help you find the right path to achieve a successful outcome. Let us guide you through every step of the way and make your real estate journey a seamless and stress-free experience.