Should I Sell My Home Before I Buy Another? It Depends…

You’ve found a home you want to purchase. The problem is you already own a house. Should you go ahead and make an offer, or wait until you sell your home before embarking on a new homebuying journey?

The right answer depends on several factors. They include:

Your Savings

Buying a house typically requires a down payment. While some lower down payment options exist, it could cost up to 20 percent of the home price. If you have a five-figure savings account balance you can tap into for your new home, going ahead with an offer is possible. If, however, you need to use the proceeds of your current home sale as the down payment, you’ll need to sell it first.

The Deal

Are you going to get the deal of a lifetime on the new property? Or is it in a neighborhood where homes almost never go on the market? If you’re dealing with these scenarios, it’s probably smart to do everything you can to make an offer on and purchase the new home. On the other hand, if the price is just fair and the house is a run-of-the-mill property, consider selling your current home first.

The Real Estate Market

If it’s a smoking hot seller’s market, it’s less risky to buy a home before you sell yours. After all, yours will most likely sell within days. If it’s a buyer’s market, your home could sit on the market for weeks or longer. This is a scary scenario that would require you to make two mortgage payments every month. In a buyer’s market, it’s smart to sell your home first.

Your Monthly Budget

If your debt load is low, and you have significant money left over every month, buying a home before selling your current one will probably be manageable for you. However, if almost every dime you make is promised, you most likely couldn’t make two mortgage payments. If you’re on a tight budget, sell your current home first.

Your Home’s Equity

How long have you owned your current property? If you’ve made payments on it for several years, you probably have quite a bit of home equity. In this case, selling your home first and using the equity as a down payment on your new home is a good financial move. On the other hand, if you haven’t built much equity in your home, selling it is less likely to help you with a down payment. In this situation, making an offer before selling isn’t a bad move.

Deciding when to purchase a new home, and when to sell your old one, isn’t a cut-and-dried choice. There are many variables affecting which decision is best for your specific financial situation. A wise move is to talk to an experienced loan officer at a mortgage loan company, who can look at your finances and lay out all the options available to you.