When you decide to sell your home, the next decision is where you will live. If you decide to buy another home, you must consider how you will make the transition. Three things will impact your choices and make the process either more difficult or easier when handled correctly.
Know Your Budget
You must know how much money you have to put on a new place to live. If you’re currently paying a mortgage, do you have money to take on a second payment?
Many lenders won’t approve you for a loan unless your income has increased substantially or your current payment is low.
Know the Market
If you’re counting on the sale of your home to pay the down payment of a new home, you’re going to need to have a pretty good idea how much your property is worth. Will the purchase price pay off the mortgage with enough left-over to pay down on a new home? You also have to know the lowest price point you’re willing to take if the buyer doesn’t offer full asking price.
When considering the market, you want to know how it is in the area where you’re selling and the area where you want to buy. A buyer’s market will benefit you where you want to buy, but you want a seller’s market in your current neighborhood. The type of market for the area will impact how much negotiation room you have and how fast homes will sell.
Know Your Options
Choosing to sell one home and buy another isn’t a straightforward process. You have multiple options for how you want to handle this transition. The one you choose will determine how the rest of the process goes.
You can buy a home and move in before selling your current home – this allows you to concentrate on one part of the deal at a time, but only if you qualify for two mortgages. You can sell your home first and stay with family or rent until you find a home to buy – this allows you to pay off your current mortgage first to qualify for a second loan but you have to move twice.
You can buy and sell during the same time – this option reduces time spent in limbo but requires careful consideration of timing
No one answer is right for everyone. You must look at your finances, your other obligations and how much stress you can handle. It’s also important to talk to a real estate agent to help determine how likely your home will sell for the asking price and how quickly they expect it to sell.
You should also talk to your lender to find out what will be required from you based on the option you choose. Buying and selling at the same time is possible, but you must work with your lender and realtor to make it happen.