4 Strategies to Buy a Home Before Selling Yours

Navigating the current housing market can be daunting, especially with tight inventory and rising demand. Many homeowners face the dilemma of whether to buy a new home before selling their current one. This guide explores four practical strategies to help you buy your next home without the stress of being temporarily homeless.

1. Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit (HELOC) leverages the equity in your current home to finance the purchase of a new one. This option requires a solid income, sufficient equity, and good credit—typically a score above 680. HELOCs offer up to 90-95% combined loan-to-value, depending on the lender, and are tied to the Prime Rate plus a margin.

Pros:

– Affordable and Simple: Often free to obtain with straightforward qualification.

– Access to Cash: Provides significant funds for your new home purchase.

– Interest-Only Payments: Manageable monthly payments.

Cons:

– Processing Time: Can take a while to secure.

– Qualification Impact: May affect your ability to qualify for a new mortgage.

2. Making You a Cash Buyer

We’ve crafted a solution that turns you into a cash buyer, enhancing the appeal of your offer and giving you a competitive edge. The NEO Power Buyer Program eliminates the common obstacles with traditional financing, such as mortgage contingencies and extended closing times.

Pros:

Competitive Edge: Cash offers are more attractive to sellers.

Simplified Process: Avoids the complications of traditional financing.

Faster Transactions: Allowing you to buy your new home before you sell your exiting home (in as little as 14 days).

Cons:

Power Buyer Fee: There is a fee for the use of the funds and interest accrues until you close your long-term financing.

3. Bridge Loans

Bridge loans offer a temporary financial solution, allowing you to use the equity in your current home to purchase a new one. Our preferred bridge loan option lets you borrow up to 75% of your home’s value without immediate payments, provided you sell your home within seven months.

Pros:

Substantial Funds: Access to significant cash for your new home.

No Immediate Payments: Easier to qualify for a new mortgage.

Quick Process: Close in as little as 14 days.

Cons:

Costs: Fees of 2.3-2.4% of the loan amount.

Equity Requirement: Must have a 25% equity cushion post-loan.

4. Renting Out Your Current Home

If you can afford to, renting out your current home can be a smart financial move. Keeping your home as a rental provides a steady income and multiple inflation hedges. Future rental income can also help you qualify for a new mortgage.

Pros:

Retain Low-Rate Mortgage: Keep the benefits of your existing low-rate mortgage.

Inflation Protection: Homes and rental income generally rise with inflation.

Additional Income Stream: Generate rental income.

Cons:

Landlord Responsibilities: Managing tenants and property upkeep.

Financial Risk: Vacancies can impact your finances.

Qualification Challenges: Future rental income may not fully offset your current mortgage payment.

Buying a new home before selling your current one is a strategic decision that depends on your financial situation and goals. Whether you choose a HELOC, the NEO Cash Buyer Program, a bridge loan, or renting out your current home, each option has its own advantages and considerations. Evaluate your needs carefully to select the best approach for a seamless transition to your new home.

Ready to explore your options for buying a new home before selling your current one? Contact NEO Home Loans today to discuss the best strategy for your financial situation and goals.

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