Juggling the sale of one home with the search for another is tricky. List your home too soon, and you risk being homeless. Wait too long, and you’re carrying two mortgages.
A hot market makes things worse. Buyers can’t afford to make a bid contingent on the sale of their home. In Denver, for example, sellers are afraid to list before they find something to buy, says Redfin agent Paul Stone, for fear they’ll be forced “to move in with their in-laws or find an expensive short-term sublease.”
Get a sense of how quickly your home might move by interviewing agents and checking websites for info about recent sales in your neighborhood. If the timeline is tight, have everything you need as a buyer ready to go. Talk to a lender about what you can afford and how quickly it can close the deal. Go beyond preapproval to pre-underwriting, where lenders review your income and asset documents.
Calculator: Comparing mortgage terms (i.e. 15, 20, 30 year)
Unless you sell first, you will need to be able to qualify for two mortgages, says Dean Vlamis, an executive at lender Guaranteed Rate. Total payments need to fall within the 28/36 rule: Housing costs should total no more than 28% of your gross monthly income, and all debt no more than 36%.
If you qualify but don’t have 20% for a down payment until your home sells, do what many buyers do: Put down 10% and open a home equity line of credit for the remaining 10%, thus avoiding the need for mortgage insurance. Then pay off the credit line when your home sells.
Agent Carol Van Hook, who works in the super-tight Fort Worth market, advises sellers to have a game plan for moving to an apartment and putting their stuff in storage. If need be, they can negotiate with the buyers to lease back the home for a month after closing.