It’s a tricky thing to time a home purchase with the expiration of a lease. Often buyers ask me: Can I make an offer on a house I like now even though my lease isn’t up until later this year to minimize the overlap?
Typically contract to close will be 30-60 days. There are several reasons for this. The first is your loan. You can not lock in an interest rate until you have a property (the letter has a rate, but if you read the fine print it will say somewhere that it’s ‘subject to’ an acceptable property…at that time they give you whatever the current rate is. Once you find a property, a lender will lock you in for 45 days for free, and beyond that you need to pay a rather hefty fee (thousands of dollars). For that reason, most buyers look to close within 45 days of contract.
Most sellers obviously want a quick close as well (unless you pay a premium to make them wait), so it’s rare to see a closing that is many months away on a resale. Occasionally sellers will want a ‘rent-back’ or post-settlement occupancy agreement, wherein they reimburse the buyers for their costs to stay in the property for up to 60 days past settlement. More than 60 days will create problems with your lender, as that’s typically the time frame after which they will consider it an ‘investment property’ and your loan terms will be different. Buyers should also remember that the first mortgage payment isn’t due until the 2nd full month after you settle. So, for example, if you settle in April, then your first payment isn’t due until June 1. This is because you make mortgage payments in arrears, rather than in advance like you do with rent.
Of course every situation is different, but an experienced agent can help you utilize some of the contract’s clauses to minimize any overlap between your lease and your mortgage. Every situation is different, so contact us to discuss your rent-to-own transition or attend a free first time home buyer class.
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