Tips for the Second-time Homebuyer
While buying your first house is a big milestone, buying a house for the second time can be an even more significant purchase. That's because first-time homebuyers often select a "starter house" that will work in the short term; however, it doesn't always meet their long-term needs. In contrast, a second-time homebuyer may be looking for a permanent place to raise a family or a rental property that can generate long-term revenue.
Why Buy a New House?
There are many reasons why someone who already owns a home might shop for a house again. Perhaps they need to relocate to a new area because of a job opportunity or a desire to be closer to family. Another reason is that as families grow, they might find that they need additional bedrooms or a bigger backyard. Some parents might choose to move to a new home in a preferred school district as their children get ready to attend school.
In other cases, people buy a new home to save money or promote long-term financial wellness. For example, the current home might be larger than they need and expensive to maintain; in this situation, the homeowners might choose to downsize to a more affordable residence. Or, they may choose to move to a neighborhood with lower property tax rates.
Finally, people may buy a new house to generate rental income, either by renting out the new property or by moving into the new home and renting out their previous property.
Deciding What to Do With the Previous House
When buying a house for the second time, you may be wondering what you should do with the first home. For many people, the answer is to sell it and use the proceeds of that sale to make a down payment on the second house.
However, selling the first house is not the only option. Other possibilities are to continue living in the first house and use the second as a vacation home, or rent it out to tenants and generate income. One can also buy a second house for the sole purpose of renting it out or living there part-time. Speak with your mortgage loan officer so that you have a better understanding of what best fits your situation.
Tips for Buying a House the Second Time Around
A second-time homebuyer should keep the following tips in mind:
- If you haven't checked your credit recently, you shouldn't assume that your score is the same as the last time you bought a house. Check your credit report at AnnualCreditReport.com to make sure your credit history is accurate before applying for a mortgage.
- Get pre-qualified – this will help give you a better idea of your budget when house shopping, and you’ll be prepared to place an offer when you stumble upon your next home.
- You may get a better deal on a house that needs repairs. Research the cost of work the property would need on sites like HomeAdvisor so you can determine if a drop in the price makes up for the amount you'd spend fixing the house.
- If you're selling a house before buying a new one, consider negotiating to rent the house back from the new buyer for a month to give yourself time to close the sale of a new home. Alternatively, you can move into a temporary rental and put furniture in storage.
As with any time you buy a house, it's a smart move to research available mortgages and go over your budget to see what mortgage payments you can afford. If you plan to use a home equity line of credit in your new home, consider a combination mortgage, which combines a traditional mortgage with a home equity loan. A combination mortgage gives you greater flexibility and may allow you to borrow a larger amount.