How to buy when you need the proceeds from selling your current home to buy your next home

It used to be fairly common to buy a home contingent upon the sale of your current home, but with such a shortage of homes for sale that is very difficult to do in this market… easier with new construction, partly because there is typically a longer lead time before closing and you don’t have to worry so much about competitive bids for the same house. They will also often contribute to your closing costs if you finance with them, and may give you a lower interest rate.

To know your options, I recommend talking to your lender first to see if you can be pre-approved to buy NOT contingent upon the sale of your current home… what is often needed to have your offer accepted on an existing home in this market.

Two issues here:

  • Do you qualify for payments on both homes at the same time?
  • Do you have the funds for the down payment on your new home before the sale of your current home? 

If you don’t have sufficient cash in hand, don’t despair. If you have family willing and able to help it’s fairly common for parents to sign a statement for the lender, saying they will gift funds if needed for closing… but it is NOT common that they actually end up doing so because there is a good chance your current home will sell quickly, providing the funds you need.

In a typical scenario, you come to an agreement on a house purchase, with a closing date 6-8 weeks out. You will have your current home ready to list before you start seriously looking so you can list your current home as soon as your purchase is solid (take photos right away, then list after inspection on your new home). In this market it usually doesn’t take long to find a buyer.

  • At this point you can try coordinating closing on both properties the same day so you get the money from your first closing to apply to your second closing. In this scenario, you typically clear out of your current home the day before closings in the morning and have the moving van ready to move into your new home the afternoon of closing day or the day after closings… could stay in a hotel or with friends/family those nights.
  • A less frenetic way to do this is to get a bridge loan from the bank so you can close on your purchase before your sale and pay it off when you close on your sale. That way you can move directly from your current house to your new one without the difficult time crunch.

Another option is to start with the purchase of your new home and move everything from your current home to your new one… then have your current home professionally staged… estimated cost around $3k. Especially with young children and pets, this can be a relief to not have to deal with showings and keeping your house in showing condition all the time. But of course you would have to deal with financing… you typically cannot get a bank bridge loan until you have a fully executed purchase agreement for the sale of your current home. With bridge loans you often pay interest only, since it is such a short term loan.

An option for securing the down payment you need is an equity line of credit on your current home if you have sufficient equity, but this must be in place before you start the sale process. If you are considering this route, keep in mind you must be able to handle payments on both your current mortgage and your new mortgage… AND the monthly payment on your equity line!

Spring market is gearing up. My buyers are excited they got the winning bid in multiple offers on a mid-century modern home this week!!

Ready to make a move… or just want to consider your options? Let me know… we would love to help you walk through the process so you can make an informed decision! 🙂

Sharlene Hensrud, RE/MAX Results –

Written By

I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

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