Making a budget for buying a house when you bought your first home might have been relatively simple. Things get a bit more complicated when you want to buy another home while you sell your current one. You have to worry about having enough money to cover the cost of the mortgage, property taxes and other fees on the new house. You also need to worry about the cost of selling your first home and the potential for having two mortgages at once.
Your budget for buying a house should include the cost of selling your current house. Seller’s costs, typically due at closing, include the commission to your agent and the buyer’s agent as well as the transfer tax and other fees. In the Atlanta area, the transfer tax is $1 for the first $1,000 of the sales price, then 10 cents for every additional $100.
While many real estate agents charge up to 6 percent commission to sellers, if you work with Duffy Realty of Atlanta, you have the option of paying a flat fee of $500 upfront plus just 0.0034 of the sales price. Rhonda Duffy has sold over 15,000 properties in 12 years with this pricing model.
The down payment
Selling your home and buying a new one makes coming up with the down payment easy because you can use the proceeds of the sale to purchase your new home. If you haven’t sold your original home yet and don’t have enough money set aside for a new down payment, you’ll need to find a way to come up with the amount. You can postpone buying the home until you’ve set aside a sufficient amount, or you can borrow the amount of the down payment and repay it once the original home sells.
One option might be to take out a bridge loan, which is meant to bridge the time gap between when you purchase your new home and sell your current one. The drawback is that bridge loans can be expensive and difficult to get unless you have excellent credit. Another way to budget for the down payment on the new home is to borrow against the equity in the current home, either in the form of a home equity loan or a cash-out refinance. You will have to either refinance or apply for the home equity loan before you list the home for sale. If you decide to refinance, you’ll have to account for additional closing costs and fees.
Buying, while selling another house, can mean that you have two mortgages at the same time, at least for a little while. Get prequalified for your new mortgage before you start looking at homes so that you have a good idea of whether you should sell first or whether you’ll be able to swing two mortgages at once. Having overlapping mortgages can mean that you must make some adjustments to your lifestyle until you’ve sold the first house.
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