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Dear Kathe,

We are considering a “move-up.” Should we buy a new home before we have sold our old home?

If you are considering buying a home, you should always start with an analysis of your finances.  Before you set out looking at homes,  it is absolutely critical that you have a firm understanding of both how much you can pay each month in a mortgage payment and how much cash you will need to close on a home in that price range.  What you don’t want to do is to is find your dream home, only to find out that you can’t afford to buy it!  Starting with a complete preapproval with a mortgage broker is, therefore, your most important first step.

You may, however, find that due to the historically low interest rates you qualify to buy a new home without selling your old home. When does it make sense to stretch your budget and eat macaroni and cheese?

If you qualify to buy without selling, it probably makes sense to do so, even if it means carrying two mortgages and eating macaroni and cheese for a while.  Our market is very hot right now and many homes are selling quickly.  If one of those homes happens to be a home you desire, if the mortgage broker can approve the loan, it is probably worth tightening your belt in the short run and getting the home you love.  Years from now, you will never remember the short term tightness of owning two homes.  Of course, you will want to price your home very realistically when you put it on the market so that you are not carrying two for too long!

It may also make sense to buy at the top of your affordability range if you are anticipating increased earnings as time passes.  It is not inexpensive to sell a home.  Sellers generally spend about 7-8% of the home’s price total in costs associated with selling their home.  Why not buy what you really want the first time and not have to pay twice?  It might feel tight now, but in a year or two as your earnings increase you will be glad you sacrificed to end up in the home you really wanted.

And of course, you don’t want to forget the benefits that come with having a higher investment in real estate.  Our area has weathered the storms with grace and continued appreciation.  As the years tick by,  a larger investment will yield greater yearly appreciation and will someday leave you with a much larger next egg to put toward your next adventure – very much worth a short stint eating macaroni & cheese!