Buying And Selling a House at the Same Time

Selling and Buying a House Simultaneously

By Jerry Litwaitis, VP of Lending

What should be the first step financially that someone takes when they are ready to sell their home and buy a new one?

You should contact the credit union and set up an appointment to go over the process with me. The credit union can determine how much you will be netting from the sale of your current home.

We can determine how much you can afford to spend on your new home, how much of your sales proceeds from your current home you want to use as a down payment on your new home and then determine what program, terms and interest rate you will qualify for. You can sell your current home and buy a new home at the same time.

You will need to set up the closing on the sale of your current home prior to the closing on the purchase of your new home, this can also be done the same day (close on the sale of your current home in the morning and then close on the purchase of a new home in the afternoon).

This way, you will have your down payment funds from the sale of your current home to use on the purchase of your new home. Your credit union and real estate agent, if applicable, can help you with setting up the times and dates to accomplish this.

Can you buy a new home before you sell your old one?

This all depends on your affordability. Can you afford to have two mortgage payments until your current home sells? Even if your plan is to sell your current home as soon as possible after purchasing a new home, you still need to be able to afford both mortgage payments along with any additional debt you may have, until your current home sells. Not an easy task, but it can be done. Set up an appointment with the credit union to see if this is an option for you.

What loan options are available for people buying and selling at the same time?

If you will be selling your current home before purchasing a new home or selling and buying on the same day, a conventional or non-conventional mortgage is all that is needed on the new home. If you want to buy a new home prior to selling your current home and you need the equity in your current home to use as a down payment you will have to be able to afford two or more mortgages to tap the equity in your current home.

Example: You owe $70,000.00 on your current home and you will be selling your home for no less than $100,000.00. After real estate agent fees and closing fees, you will be netting $20,000.00 from the sale. In order to get the $20,000.00 equity in your current home, you would need to refinance your existing house for $90,000.00. $70,000.00 would be used to pay off your existing home mortgage and the $20,000.00 would be used for the down payment on your new home mortgage. This refinance of your current home is what is commonly called a “bridge loan”. Keep in mind that you will now have two mortgages to pay for until your current home sells. The $90,000.00 on your current home and the mortgage on your new home. You could also take out a second mortgage on your current home for $20,000.00 to use as the down payment for the purchase of a new home, however, you will now have three mortgages to pay for (your first mortgage on the home your are trying to sell, a second mortgage for $20,000.00 on the home you are trying to sell and a mortgage on the new home). Again, this will all be based on your affordability.

What happens to your mortgage when you sell your house and buy another?

The mortgage loan on the house that you sell is paid off with your financial institution and the lien on your house is satisfied with the county register of deeds office (a satisfaction of mortgage is prepared and recorded with the county to release the financial institution’s lien on your house). When you purchase a new home, the financial institution will file a separate mortgage with the county register of deeds office on the new property.

Contact MMCCU with any questions!