What to Do with Proceeds from Sale of a House: Smart Financial Moves for 2024
Selling a home often elicits a mix of excitement and stress. The proceeds from the sale are a valuable asset that can open up opportunities for your next chapter in life. Whether you’re planning to buy another home, invest in real estate, or take a break from homeownership, understanding what to do with the proceeds from the sale of a house is crucial for making smart financial decisions.
Unless you are a homeowner in a high taxed state, with the exception of California, such as Illinois or New York, the chances are you have made a significant profit on the sale of your home. California is facing a housing shortage due to the state’s tough environmental regulations and demand for housing.
In this guide, we’ll walk you through your options and help you determine the best way to use your home sale profits to achieve your financial goals. And, if you’re thinking about getting a mortgage for your next home purchase, we’ll provide information on how you can qualify for a loan with Gustan Cho Associates.
Selling Your Home in a Hot Housing Market
Most homeowners who have owned their homes for at least five years or longer are seeing appreciation in equity-like they never dreamed of before. There are many possibilities on What To Do With Proceeds From Sale Of A House in today’s market. This holds true if you are a homeowner in California who sells your home. California home prices are double the national median average. You can get a lot of house for the money if you leave California to a lower-taxed with affordable housing. A large percentage of our business at Gustan Cho Associates are homebuyers and homeowners from California.
What to Do with Proceeds from Sale of a House: Plan Ahead
Many home sellers are selling their homes at a huge profit due to skyrocketing home values. Home prices in California are double the national median average due to demand for homebuyers versus low inventory. Many Californians who are fleeing California to other lower-priced states can really cash in from the sale of their homes.
Despite the mass exodus of taxpayers and businesses out of California, the California Housing Market Forecast for 2024 remains strong. Home prices are expected to keep on increasing due to more demand versus inventory of housing. Average home prices in California is $600,000 versus the $298,650 median home value for the rest of the nation.
First things first, before making any major decisions, it’s important to sit down and plan. Take a moment to think about your long-term goals and what you want to achieve with the proceeds from your home sale. The right choice for you will depend on whether you plan to buy another home, invest, or take a break from the housing market.
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If You’re Buying Another Home
The most obvious use of your proceeds is purchasing another home. The housing market in 2024 is a little different from what it was a few years ago, and understanding your options is key to making an informed decision.
Mortgage rates have fluctuated in recent years, sitting slightly higher than in the past. If you’re ready to buy, it’s important to consult with a loan officer at Gustan Cho Associates to see what financing options are available. We specialize in helping homebuyers secure the best rates, even if you have unique circumstances.
How Much Do You Need for Your Next Home?
When considering what to do with the proceeds from the sale of your home, it’s essential to understand how much money will be required for a down payment, closing costs, and any other necessary expenses related to buying your next property. The down payment may vary depending on the loan type you qualify for.
Considering conventional loans, you may need between 3% to 20% of the home’s purchase price. When contemplating an FHA loan, it’s important to note that the down payment may be as minimal as 3.5%. Gustan Cho Associates is prepared to help you explore your loan options, regardless of your credit score.
What to Do with Proceeds from Sale of a House if You’re Not Buying Right Away
If you’re not planning to buy right away, that’s okay! Many homeowners who sell their homes take a break from homeownership and rent instead. This gives them time to plan for the future or simply enjoy the flexibility that comes with renting. However, making the most of your sale proceeds is still important.
Saving for a Future Home
Even if you’re not in a rush to buy, it’s wise to set aside enough money for a down payment when ready. One of the best places to put your money is in a high-interest savings or money market account. While these options may not earn huge returns, they’ll keep your money safe and accessible.
If you plan to buy again within the next few years, you might also want to consider a Certificate of Deposit (CD). Certificates of deposit (CDs) typically offer a more favorable interest rate than regular savings accounts. They enable individuals to secure a fixed return over a designated timeframe, which can benefit those seeking stability in their investment strategy.
Paying Off High-Interest Debt
Another important decision to make with the proceeds from the sale of your home is whether to pay down any high-interest debt. Credit cards, personal loans, and auto loans often come with elevated interest rates, which can gradually diminish your financial resources. Understanding these implications is crucial for effective financial planning.
If you are burdened with high-interest debt, utilizing a portion of your home sale proceeds may be advantageous to pay it off. Reducing debt will free up more of your income and improve your credit score, a key factor in qualifying for a mortgage. Gustan Cho Associates can help you get pre-approved for a loan once your financial situation is improved.
Should You Invest the Proceeds from the Sale of Your Home?
Many homeowners selling their homes are sitting on significant amounts of cash. If you’ve made a good profit from the sale of your property, you might be thinking about investing that money. But before jumping into investments, it’s crucial to consider your options carefully.
The Risks of Keeping Cash
While cash may seem like a safe option, it’s important to understand that inflation could erode the value of your savings. In 2024, inflation rates remain relatively high, meaning that the purchasing power of your cash will gradually decrease over time.
Investing in Real Estate
Real estate is one of the most popular investment options, and you might want to consider if you have a significant amount of proceeds from the sale of your home. You could use the money to invest in rental properties, vacation homes, or even flip houses.
If you’re interested in real estate investments, talk to a mortgage broker at Gustan Cho Associates about your financing options. We offer portfolio loans and other creative financing solutions that could help you expand your real estate portfolio.
Other Investment Options
If real estate doesn’t align with your interests, exploring options such as stocks, mutual funds, or bonds may be worthwhile. While the stock market often experiences fluctuations, it has historically shown the capability for substantial returns over the long term. Assessing your risk tolerance is crucial when investing in stocks or mutual funds. Additionally, diversifying your investments can serve as an effective strategy to reduce the possibility of significant losses.
When evaluating investment options, precious metals such as gold and silver merit consideration, particularly during periods of economic unpredictability. Although these investments may not yield the same high returns as others, they typically retain their value over time and protect against inflation.
Before diving into any investment options, speaking with a financial planner is crucial. A qualified professional can assist individuals in evaluating their financial objectives while formulating a strategy that aligns with their specific needs and risk preferences.
What Not to Do with Proceeds from Sale of a House
While it’s important to know what to do with the proceeds from your home sale, it’s just as important to know what not to do.
Don’t Splurge on Unnecessary Purchases
It’s tempting to treat yourself to a vacation or buy that shiny new car you’ve had your eye on. However, splurging on big-ticket items without a clear plan for your financial future can lead to regret.
Remember, the proceeds from your home sale should be used to secure your financial future—whether that means buying a new home, paying off debt, or investing for retirement. Treat yourself, but don’t forget to prioritize your financial health.
Don’t Ignore Your Retirement Savings
If your retirement accounts are underfunded, consider using home sale proceeds to boost your retirement savings. Contributing to an IRA or 401(k) can offer significant tax advantages. In 2024, individuals are permitted to contribute as much as $6,500 to an IRA and $22,500 to a 401(k). Notably, there are even greater contribution limits available for those aged 50 and older. This expanded capability can significantly enhance retirement savings for participants.
If you’re unsure how to maximize your retirement savings, consider consulting with a financial advisor.
Don’t Buy a New Car
It’s easy to get excited about buying a new car with the cash from your home sale. However, cars are depreciating assets. When you drive that new car off the lot, it starts losing value. Instead of buying a brand-new car, consider using some of your home sale proceeds to pay off any existing car loans or save the money for a future vehicle purchase.
Conclusion: Making the Most of Your Home Sale Proceeds in 2024
Selling a home is a major financial milestone, and understanding what to do with the proceeds is key to making the most of it. When considering options such as acquiring additional real estate, investing in stocks, or tackling existing debt, it is crucial to make informed and strategic choices. Such decisions play a significant role in achieving financial stability and growth.
At Gustan Cho Associates, we specialize in helping homeowners and homebuyers make smart financial moves. If you want to buy another home or need guidance on securing a mortgage, we can help you explore the best options available.
Take control of your financial future today by contacting one of our expert mortgage brokers. Call or text us at 800-900-8569 or email gcho@gustancho.com. We’ll help you navigate the process of using the proceeds from the sale of your house to achieve your homeownership and investment goals.
Frequently Asked Questions About What to do with Proceeds from Sale of a House:
Q: What Should I do with Proceeds from the Sale of a House?
A: When selling your home, you have several options. You can use the money to buy another home, pay off high-interest debts like credit cards, invest in real estate or stocks, or even save for the future. Planning ahead and deciding what works best for your financial goals is important.
Q: Can I Use the Proceeds from the Sale of My House to Buy a New Home?
A: Yes, using the proceeds to buy a new home is one of the most common options. You can use the money for your down payment and closing costs. The amount you need will depend on the type of loan you qualify for, such as a conventional or FHA loan.
Q: Should I Invest the Money from the Sale of my Home?
A: Investing your proceeds might be a good idea if you’re not ready to buy a new home or pay off debt. You can invest in real estate, stocks, bonds, or precious metals like gold and silver. Just be sure to assess your risk tolerance and talk to a financial advisor first.
Q: What if I’m Not Buying Another Home Right Now?
A: If purchasing a new home isn’t on your immediate agenda, consider saving your funds in a high-yield savings or money market account. Alternatively, investing in a Certificate of Deposit (CD) presents a viable option, providing a fixed return over a specified period.
Q: Is it Good to Pay Off my Debts with the Proceeds from Selling my House?
A: Absolutely! If individuals have high-interest debts, such as credit cards or auto loans, allocating a portion of the sale proceeds to settle these debts is wise. Reducing outstanding debt can enhance one’s credit score, thereby increasing available income for savings or potential investments in the future.
Q: Should I Buy a New Car with the Proceeds from Selling my House?
A: It might be tempting, but buying a new car isn’t the best financial decision when considering what to do with the proceeds from the sale of a house. Cars tend to depreciate rapidly, which can make them a less favorable investment choice. A more advantageous approach might be to save or invest that money, thereby enhancing wealth over time.
Q: Can I Use the Money to Fund my Retirement?
A: Certainly! If retirement accounts are not fully funded, utilizing a portion of the proceeds to contribute to an IRA or 401(k) is a wise strategic move. Contributing to these accounts not only aids in securing a comfortable future but may also offer valuable tax advantages.
Q: How Much do I Need for a Down Payment on a New Home?
A: The amount you need for a down payment depends on the loan type. A conventional loan could be anywhere from 3% to 20% of the home’s purchase price. For an FHA loan, it may be as low as 3.5%. The proceeds from your home sale could cover this cost.
Q: What are the Risks of Keeping my Sale Proceeds in Cash?
A: While keeping cash safe, it’s important to know that inflation can reduce its value over time. 2024 inflation will remain high, so your money could lose purchasing power. Investing some of it or saving it in a high-yield account might be better.
Q: Is it Wise to Consult a Financial Advisor Before Using my Home Sale Proceeds?
A: This is an excellent approach! Engaging a financial advisor can significantly enhance your ability to make informed decisions regarding your sale proceeds in alignment with your financial objectives. Whether you intend to invest, save, or purchase a new home, they can effectively guide you toward the most advantageous strategy tailored to your unique circumstances.
This blog about “What To Do With Proceeds From Sale of a House” was updated on December 26th, 2024.
