You’ve decided to sell your home to upgrade or even downsize, but you don’t know whether you should start looking and buy first or wait to sell first. The best-case scenario is to do both, but that takes a lot of planning. If you are sure your credit is good enough to get the loan you want, you can find a home and you have a buyer for your home all at the same time, the process could be quite smooth. Working with an excellent real estate agent goes a long way to making this scenario go smoothly.
If you decide to buy a new house before you sell, and then put your home on the market, or choose to put your home on the market and buy a new home, even if your home doesn’t sell quickly, you will most likely have a place to move to—and can take your time moving. This plan has two hitches, and they’re not necessarily bad:
Your house sells quicker than you expected. If it does and you haven’t found a home, or you did, but you haven’t closed yet, you may have to move to temporary housing until your deal closes. On the other hand, if the seller is not in any hurry, you could rent your home back until your deal closes and you get moved.
You will have to pay two mortgages. If your current home is not paid off, you will have to pay two mortgages. Depending on your income, you may not be able to close the loan on the new home until you sell your current home. If your debt-to-income ratio has room for two mortgages, this is not a problem.
Selling first is probably the safest way to go about moving. Once your house sells, put most of your possessions into storage and find a short-term rental. This allows you to take your time finding your dream home and getting the financing for the new house. Since you have all the time in the world, you’ll be able to shop around for the best mortgage without feeling pressured to take something because you need to close quickly.
Making the Decision
Before you decide on whether to buy or sell first or do both at the same time, determine which is best for your situation.
Check your credit score. The better your credit, the lower your new interest rate will be. Lenders will be more willing to work with you.
Start browsing for homes for sale to see if there is anything you are interested in.
Know how much mortgage you will qualify for. Speak to several lenders about the different available loan programs.
Contact a real estate agent to discuss listing your home. Ask about the listing contract and the cost of listing. Some real estate agents give you a discount on their commission if you use them to buy and sell.
Know the market. If buyers are flooding the market, it may be easier to sell your home. If sellers are flooding the market, it may take longer to sell your home because there are many homes for people to choose from.
The answers to these questions will let you know if it is better to buy or sell first.