After selling my current home, I'll ultimately net a nice little chunk to travel and for my retirement.
My question relates to the sequence on buying, selling and getting mortgages. Is it easier to get a mortgage now, while I’m employed, then purchase and remodel the home now? If I did that, then I’d sell my current home and move. I know it means carrying two properties at the same time for a while. If not, how should I sequence the sale, purchase and remodeling of my homes?
A: Buy now, sell later? Or, sell first and then buy (maybe after a period in a rental). It is the right question to ask, particularly if you are on the verge of retiring and your financial situation is going to change dramatically.
We tend to be a bit more conservative. We generally prefer to see our sellers sell their homes before buying another one. Owning and carrying two homes can eat up quite a chunk of change, and most people do not have the stomach to pay for two homes at the same time, not to mention the cost of remodeling the new property.
Real estate is hot in some markets. If you are selling in a hot market, and you have the financial wherewithal to hold onto both properties for a year, then go ahead and start looking for your new home. If you find a bunch of things in your price range, you might then list your current home, and if you get a sale quickly, move into a rental while you find your next home.
Once you have sold your home, the worst thing that could happen is it could take you a while to find a new home that suits your needs. While you might have researched the market, narrowed down the area you want to move to, decided on the type of home and the budget for renovation, it still might take a while to find the perfect home. But you would have sold your old home and have cash on hand. Having cash gives you so many options.
On the financing front, you seem to have great credit with a score of over 800. And, yes, it will be easier to find a lender that will give you a mortgage when you have a job than when you do not, especially if you have had that job for a while. To qualify for a new loan after you have retired, you will have to show you have sufficient income from Social Security, investments and pensions to carry the loan and the expenses. Showing that income stream can be tough, especially for people who live off their savings. Retirees will generally have to put down a higher down payment.
Talk to a mortgage broker, mortgage lender or credit union to go over your current finances and what you think your finances will look like after retirement. The lender may tell you that you should not expect to qualify for a loan or may tell you what you need to qualify once you do not have a job. Once you have that information, you can think about whether it makes sense to buy the new home now or wait until you have sold your existing home.