How To Prepare For The Loan Process When You Are Also Selling

It was an enormous task to buy your first home. Do you remember the research? Do you remember the piles of paperwork that you need to read and sign? What deadlines are there? (If you're a first-time buyer, check out the steps you can expect during the mortgage process.)

Even though you are now a homeowner, it is time to let go of all the stress and anxiety associated with buying a new home. This comes with the additional complexity of having to sell your home. This guide can help you feel at ease, no matter where you are in the process.

Take Into Consideration The Timing

If you had a perfect world, you would sell your home and use the proceeds for your new house. Unfortunately, things like selling and buying a home don't always go according to plan.

It is important to research the local real estate market where you will be selling or buying, if any.

You'll need to know how long comps (comps) have been on the market. This is called days on the market, or DOM. Many sellers make the error of pricing their home too high, then have to lower it several times to get enough interest. You must price your home fairly if you want to sell your house quickly. A real estate agent will help you determine the best comps for your property, and the price is based on the time frame.

You can research your potential neighborhoods before you buy. Then, once you have signed the contract, you will be ready to choose a home.

If you need a loan to purchase a new home, it is advisable to speak to lenders.

Contingency Offers

If you are both buying and selling your home and need funds from the sale of your home to finance your purchase, your offer might have to include a "sale-and-settlement contingency." This means that your offer for the new home will be contingent upon your selling your old home.

Ask your agent whether it is wise to make such an offer in your area. Sellers are less likely to accept contingent offers than traditional, non-contingent offers. Sellers can accept other offers even after accepting your contingent offer. You will have a time limit (usually 24-48 hours) to accept a new offer and drop your contingency. If you are unable to accept the new offer, the seller will accept another offer. You'll be back at square 1.

Many sellers will accept traditional offers in hot real estate markets where properties may stay on the market for days instead of weeks. Buyers get into competitive bidding situations. They don't need to wait for their buyer to sell an existing home. It is possible that they don't want their house to be shown "under contract" or with a contingent sale. This could discourage potential buyers from viewing the property and making an offer.

Applying For A Loan

Once your offer has been accepted, you can apply for your mortgage. Again, it is a smart idea to request quotes from multiple lenders.

To qualify you, the lender will add your current mortgage payments to your monthly debt to determine your debt-to-income ratio (DTI). This ratio is a comparison of your monthly recurring payment to your gross monthly income. Your DTI should not exceed 43 percent for most lenders. Next, you'll need to decide how much to put down, how much to finance, and the type of mortgage you need.

There Are Options If Your Current Home Is Still For Sale

The sale of your existing home should go smoothly with the purchase of your new one. In reality, however, these steps are not always in sync. Here are some loan options to help you buy your home before it sells.

• Home Equity Loans

• Low-down

• Payment Loans

• Piggy-back Loans

• Bridge Loans

A rent-back arrangement is another option if you're still looking for a new home after your current home sells. Rent-back is when the buyer agrees that they will "rent" your existing home to you, typically for 60-90 days.

You may be required to reduce your home's price or rent out your apartment to compensate the buyer.

You should be aware that not all lenders will allow rent-back arrangements. Make sure you check with your lender to confirm.

Get Ready To Move

It's possible to reduce the stress of buying and selling a house simultaneously with a little preparation.

Find out the market and determine how to price your home to sell it within your time frame. Consider whether you would like to make a contingent deal and, if so, what loan options to consider with lenders.