Whether you are upgrading, downsizing or simply moving locations, you might ask yourself – should I sell my current home first or should I buy a new home first? Evaluating several factors, including your financial resources, mortgage loan details and location, will help you make this decision.
Talk to a mortgage consultant. Can you qualify for a new loan with your existing home loan or do you need to sell your current property first? Ron Wivagg, national sales support manager of Prosperity Home Mortgage, suggests getting preapproved for a mortgage both ways, so you know your options upfront.
If you’re able to have multiple mortgage loans simultaneously, holding onto a property with a low interest rate and keeping it as a rental could be a good option. According to Wivagg, homes are appreciating and interest rates on current mortgage loans are low, so it is a great time to own an investment property. Be sure to consider unforeseen factors – you may not be able to rent the property immediately or your tenant might not pay their rent on time. If this occurs, can you afford two mortgage payments?
Analyze your local market. “It is an undersupplied market in a lot of areas,” said Penny Noval, a real estate agent in Long & Foster’s Timonium, Maryland, office. “You may be better off securing the house of your choice first.”
In many areas, the active inventory of homes for sale is very low. If your house is put on the market in great shape and for the right price, you should be able to sell it rather quickly. Make sure you have a plan in place if you decide to sell your current home first. Do you have close-by family to stay with? Can you rent temporarily? You might even consider a long-term hotel until you find a new home to buy.
Whether you want to sell first or buy first, there are various contingencies that might make sense to include in your transaction contract, according to Nathan Carnes, manager of Long & Foster’s Chevy Chase Miller office in Washington, D.C. Your local real estate agent can walk you through these contingencies and suggest if, or when, you should include one in your transaction. It is important to note that due to low inventory, properties on the market typically receive multiple offers and an offer with a contingency is not as appealing and may not be accepted.
Make a decision that is right for you. Do you have children or pets to consider? If so, temporary stay options may be limited. Some rentals and hotels do not accept pets. If you have children and plan on moving temporarily or permanently in the middle of the school year, be sure to look into the school district of your new destination.
“Ask yourself,” suggests Noval. “How will you sleep at night? Do you need to know where you’re going before you separate yourself from your home, or do you need to know your existing home is gone before buying a new home?”
Whether you should sell first or buy first will vary based on your local market, individual wants and needs, and financial situation. If you are in the market to sell and buy a home, contact your trusted local real estate agent for advice.