#1 Get a CMA and determine what your home will sell for now. Your home may sell for less than you bought it for in '06. That's the bad news. The good news is that the property you want to move into may be selling for the same percentage lower than its '06 value. You also need to check your mortgage to see if you owe more on your home than it's present worth. If the difference is workable you can roll that amount into your new mortgage. Check with a good lender.
We are seeing higher luxury properties selling well as long as they are priced properly. Home prices have fallen since '06, but the decline appears to have halted, and the market seems to be flat in terms of prices. The good news is that mortgage rates are as low as they have ever been, and most likely as low as they are going to be. Because of homes prices being as low as they are likely to be and rates being incredibly low, now is the time to trade up and get a better rate. The single family home market is bouncing back much better than the condo market, which is dragging the housing market. Buying a larger home now with the expectation of being able to sell it for a good profit in 10-12 years is very reasonable. Don't plan on short term flipping of the home.
Don't forget to check on FHA loans. You can get a better rate with a lower down payment. If you need a more detailed market analysis contact me.