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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Buying and Selling a Home at the Same Time

MORTGAGE

Buying and Selling a Home at the Same Time

What you'll learn: Pitfalls to avoid when buying a new home before selling your current home

EXPECTED READ TIME: 5 MINUTES

January 03, 2023

Buying and Selling a Home at the Same Time

In a perfect world, moving would be as simple as buying the house of your dreams, immediately selling your current home, closing on both, and moving on the same day. Reality tells us the process is rarely that easy. Multiple parties, financing, and inspections are just a few of the complexities that throw things out of sync. So is it possible to buy and sell a house at the same time?

This question really comes down to whether you can – or should – buy before you sell. After all, that would allow you to sell quickly, avoid multiple moves, and avoid paying for temporary housing too. It also puts you in a position to shop around for the perfect place without the pressure of having to get out of a home you’ve already sold.

Pitfalls of buying a new home before selling your current home

Those benefits are appealing, but they do come with potential drawbacks. Let’s look at some of the most common dangers of buying a house before selling.

Financing x2

It’s a stretch for many people to get approved for one mortgage. Are your finances strong enough to add a second? Lenders may be wary of a higher debt-to-income ratio (DTI) caused by your original mortgage – even if you hope that home will sell soon. And if you are approved, the terms may not be as appealing as they could have been without the other loan. You may end up with a higher interest rate and therefore a higher loan amount to pay off.

Double the mortgage payments

Your goal is to make a quick sale, but there are no guarantees of avoiding two mortgage payments for months or even years if it ends up being difficult to sell your home. That can add up quickly and cause financial hardships on families that could use the money for everyday expenses or paying off other debts.

It messes with your home buying budget

Do you plan to use the profit from your current home sale toward your new house? Buying before you sell means you might not have an accurate gauge on how much home you can actually afford. Especially when your dream home is staring longingly back, you run the risk of overbuying.

How to succeed at buying before selling

Doom and gloom aside, you do have options available to make the buying and selling process more seamless. There are even times it makes sense to buy first, such as when you're financially prepared, market conditions are right, and you can harness the right tools to reduce risk. Here’s how to buy another house before selling yours.

Prepare your finances

If you’re considering putting an offer on a house before selling yours, start months in advance with a careful look at your budget. Can you cut back on eating out and pause subscriptions to start building up savings and paying down debt? A strong financial foundation will put you in the best position possible.

Understand market conditions

Are you going into this process during a seller’s market, when inventory is low and you’re likely to quickly receive multiple offers and get top dollar for your current house? Or is it a buyer’s market, in which selling can be slower and less profitable, but you may land a deal on your new place? Your strategy will depend on what’s happening in the local housing market, often driven by our country’s economy as a whole.

Make contingencies

One solution can be to include one or more contingencies in your offer. When you do this, the sale will not go through if your condition (contingency) is not met. Contingencies save you from a purchase that may lead to financial hardship.

Here are two common contingencies to consider in this situation:

  • Financing Contingency – Gives you time to apply for and receive approval for a mortgage to purchase the home. This way, you can take the offer to your lender to provide assurance that you won’t be carrying two mortgages indefinitely.
  • Home Sale Contingency – Gives you a specific amount of time to find a buyer for your current home. This way, when you find the home you want to buy, you can request extra time – often 30 to 90 days, according to HomeLight – to sell your home before closing on the new one.

Access your home equity

If you need funding to put a down payment on a new house before your current one sells, special financing options may be your secret weapon. You may be able to tap into your current equity through a home equity line of credit (HELOC), home equity loan, or cash-out refinance.

Additionally, some lenders offer a mortgage bridge loan, which uses your current home as collateral to secure funding for a down payment on your new house purchase. Be aware that bridge home loan rates are generally higher than other financing types and terms are typically limited to six to twelve months. A good lender will help you weigh your options to decide what choice makes sense for you.

So, can you buy and sell a home at the same time?

While tricky, it is certainly possible. As we’ve discussed, the more important question is whether buying a home before selling is feasible. Which, like so much else, comes down to your unique situation.

Want to know the essentials for selling your home?  Check out our free eBook.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Selling Your Home in a Seller’s Market | PenFed Credit Union

What's the best strategy for selling your home in a seller's market? From smart pricing to creating an eye-catching listing, find out the dos and don'ts to sell fast and profitably.

looking at homes in hot housing market

Finding a Home in a Seller’s Market | PenFed Credit Union

Buying a home in a competitive seller's market is challenging. We have ways you can find motivated sellers, avoid the competition & bidding wars. Read on.

house in summer

When is the Right Time to Sell My House? | PenFed Credit Union

Discover the best and worst time to sell a house. Then you can decide when to put your home on the market for maximum profit and the least amount of stress.

house in fall

Should You Sell if Rates Are Rising? | PenFed Credit Union

Since interest rates are rising, should you sell your home or wait? There are many things that affect real estate prices, find out what they are so you can decide.

house in winter
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of December 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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Routing #256078446

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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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