5 Tips you should check out
When you outgrow your home or realize it no longer suits your needs, then it's time to find another home and move on. However, buying your next home can be quite a different experience from buying your first home. Here are some tips that will help you out this time around.
Use your current equity to estimate a maximum budget.
Generally, buyers spend more on their next home than they did on their current home. But the big question is: how much more? A good way to start establishing your budget is to determine how much equity you have in your current home.
If you plan to use equity as a 20% down payment, multiply it by five for a rough approximation of the absolute maximum you should spend on your next home. For example, if you have $50,000 in equity, you should be looking at homes for $250,000, at most. This is just a rough guideline. In many cases—especially if you have a lot of equity—you will want to spend much less than this. It's simply nice to know what your upper limit is.
Decide what upgrades are most important.
You may not be able to afford to upgrade everything about your current home. So, decide which upgrades are the most important to you. Maybe having more space is most important, or perhaps your key priority is moving to a better school district. List your desired upgrades in order from most to least important. This will help guide your home search and ensure you spend your money wisely.
Establish a strong selling price for your current home.
You don't want your current home to sit on the market for months because you overpriced it, and you don't want it to sell for less than it is worth because you underpriced it. Really take your time to get several appraisals before setting a listing price for your current home. Work with an experienced seller's agent who has a history of pricing homes appropriately. The more money you earn from your current home, the more you'll have to invest in your next one. But buying a home can turn into a nightmare if your asking price makes your current home hard to sell.
Consider 15-year and 30-year mortgages.
Sit down with a lender and discuss all of your mortgage options. Don't assume what worked for you last time will still be the best option today.
When you bought your first home, your budget was probably limited, and 30-year mortgages were likely your best choices. Now that you're a bit older, presumably have a higher income, and have more money to contribute to the down payment, a 15-year mortgage might be something to consider. Your monthly payments will be higher, but your interest rate will likely be lower—so you'll pay less interest overall. Then again, if you plan on moving again in a few years, another 30-year might be right for you.
Consider contingencies necessary for your offer.
Before you start seriously looking for a new home, think about what your move will look like. Unless you can pay two mortgages for a few months, you will need to ensure any offer you make on a home is contingent on the sale of your current home. Sit down with a real estate lawyer and your lender to ensure everyone understands your need for this contingency and can add it to your contract.
Buying a home the second time around looks a lot different than buying your first home. However, with the guidance above, you should have a smooth buying experience and end up in another place you love.