Why would someone sell two houses to buy one? Marriage or co-habitation.

If two people both own property and want to sell both homes in order to buy a home together, the plan can get muddy, but it doesn’t have to. There is a simple way to sell two houses and buy another but the plan must be thought out ahead of time.

One of the first problems that couples can run into is qualifying for a mortgage. If both parties already own property they may not qualify for an additional loan until one of the homes or both sell. Home sellers with properties that they don't owe a mortgage on or they have enough equity to generate cash to buy another home outright have a little bit more freedom, but the reality is that most of us have a mortgage and may not have enough funds to put down another home until one of the homes are sold.Selling Two Houses to Purchase One

Lenders use ratios in order to determine qualifications for mortgages. If both homeowners already have mortgages, adding another one to the next may put them out of the range to qualify. The front end ratio is the percentage of mortgage payments to combined gross monthly income and the back end ratio is the percentage of mortgage payments coupled with additional debt, including student loans, credit cards etc. If these ratios are too high the homebuyers may not qualify to own all three properties at the same time.

If one of the two homeowners decide to turn one of the properties into a rental this can get tricky as well since most lenders may not allow the rental income to be used as a calculation. It would increase the income and lower the ratio but because lenders follow strict guidelines regarding the links of time the home must be rented in order to qualify, this may not be an option. Another solution could be a contingency offer.

If the sellers need the down payment from the sale of one of the properties in order to make a down payment they would need to write up a contingency offer. This will give them away out but many sellers don't like contingency offers because they're not always certain. One of the other options is selling both houses before purchasing a new one.

It might be more beneficial to sell one house before buying a new one but if it is necessary to sell both homes before the purchase there are three basic choices: homeowners can sell the existing home with the contingency offer, they can sell the homes with the rent back option after closing to give sellers time to find a new home or they can sell both homes, moved into a rental property and then take their time to look for a new home.

Read more: Help! I'm closing and don't have enough money!

It all depends on the current market. A contingent offer might be widely accepted in the seller's market but in a buyers market, buyers are much often more willing to wait for a seller to find a home to buy rather than the other way around. The problem is, if buyers have found their dream home it could be very difficult to manage three mortgages all the while selling two purchasing another.

Of course, working with the right lender and real estate agent can make this a possibility. It might be slightly stressful during the transaction but if you know all the variables ahead of time it can make the move much smoother.Give me a call today and let's discuss the options of selling homes at the same time as purchasing.