Is It Okay to Buy a New Home Before Your Old One Has Sold? Here's What Dave Ramsey Says

You may want to heed this advice.

The decision to sell a home isn't one to take lightly. Not only are there financial implications involved, but emotional and logistical ones, too.

Meanwhile, these days, the housing market lacks inventory in a serious way. And so if you happen to find a home you really want to buy, you may be inclined to put in an offer before your current home has a buyer lined up.

But is this a smart strategy? If you ask financial guru Dave Ramsey, the answer is a definite "no."

Why you shouldn't buy a home until your current one sells

It's easy to see why you might want to jump at the opportunity to scoop up your dream home before selling your current one -- especially in today's market. But on his blog, Ramsey says point blank, "Never buy a home until your current one sells!" (Yes, that exclamation point is all him.)

The reason? It's hard to predict how long your home will sit on the market. And if you're forced to close on your new home before your old one sells, you could end up in a serious financial crunch.

Imagine you move forward with a new home purchase under the assumption your current one will sell within a few months. Meanwhile, once you close on your new home, you'll be on the hook for your new monthly mortgage payment, property taxes, upkeep, and so forth in addition to those costs for your old home.

If your old home lingers on the market too long, you could end up depleting your savings or, worse yet, racking up lots of costly, unhealthy debt just to stay afloat. And that's a risk you probably don't want to take.

These days, home buyer demand is soaring due to limited inventory. So you might assume that buying a new home before closing on your old one is a pretty safe move given how quickly properties have generally been flying off the market.

But remember, even if you find a buyer quickly, your closing could still get delayed. And that could mean having to cover two mortgage payments for several months, plus the other costs of owning a home.

There's a workaround to consider

It's not every day that you find the perfect home. If that's the boat you're in, but you've yet to sell your current home, one option is to make your offer contingent on the sale of your existing home. Having that clause gives you a disadvantage over competing buyers with no such contingency -- there's no getting around that. But you may be able to gain back your edge by making a more generous offer -- one that's well-above asking price.

Remember, tempting as it may be to jump at the opportunity to buy a fabulous new home, doing so before selling your current home is a dangerous move you might regret. And while Ramsey tends to be conservative in a lot of his advice (such as to avoid credit cards like the plague), this is one situation where he may be spot-on.

Of course, if you have loads of savings and can afford to pay for two homes simultaneously for many, many months, then you may be the exception to the rule. But otherwise, consider the danger of buying a new home before selling your current one.