Jeremy Boillot
Loan Originator | NMLS: 1208591
Loan Originator | NMLS: 1208591
For many homeowners, moving into the next home creates a frustrating question:
How do you buy the new home when much of your money is still tied up in the home you already own?
Traditionally, homeowners had a few imperfect choices. They could sell their current home first and potentially move twice, make an offer contingent on selling their existing home, or attempt to qualify while carrying both homes.
Today, homeowners may have additional financing strategies available that can make buying a home before selling the current one significantly easier.
Most move-up buyers aren't starting from scratch. They may have significant equity in their current home that they plan to use toward the down payment on their next property.
The problem is that the equity isn't always readily available until the home sells.
That can create several challenges:
This is why the financing strategy should ideally be discussed before you begin making offers, not after you find the perfect home.
The traditional approach is to sell your existing property before purchasing the next one.
Once the sale closes, the proceeds can be used toward the down payment and closing costs on the new home.
Financially, this can be straightforward. Logistically, however, it can create problems.
If you haven't found your next home before the current property sells, you may need temporary housing, storage, or a short-term rental. You could also feel pressured to purchase the next property quickly rather than waiting for the right home.
Another option is making the purchase dependent upon successfully selling your current property.
A home-sale contingency can reduce some financial risk because you aren't necessarily committing to owning both properties indefinitely.
However, sellers may prefer offers without this contingency, particularly when they have multiple buyers interested in the property.
Removing the home-sale contingency can therefore make an offer more attractive—but doing that requires the right financial strategy.
Some homeowners have sufficient income and assets to qualify for their next mortgage while keeping their existing property.
This can provide considerable flexibility.
You can purchase the next home, move when you're ready, prepare the old home for sale, and then list it without trying to coordinate two closings perfectly.
The challenge is that qualifying with two housing payments can significantly affect your debt-to-income ratio.
Even borrowers with substantial home equity can run into this issue because equity and qualifying income are two different things.
A bridge loan is designed to help homeowners bridge the financial gap between their existing home and their next one.
Depending on the program and borrower's circumstances, a bridge or home-equity strategy may allow a homeowner to access a portion of the equity in the current property before it sells.
Those funds could potentially be used toward the new home's down payment, closing costs, or other expenses associated with the move.
Bridge financing isn't appropriate for every homeowner, so it's important to understand the costs, repayment requirements, and how the financing affects qualification for the new mortgage.
Another strategy available to some homeowners is commonly referred to as Buy Before You Sell.
These programs are designed specifically around one of the biggest problems facing move-up buyers: purchasing the next home while equity is still tied up in the current property.
Depending on the program, a Buy Before You Sell strategy may help homeowners access equity, address the existing housing payment for mortgage qualification purposes, or make an offer on the next home without a traditional home-sale contingency.
Because program structures and eligibility requirements vary, homeowners should evaluate the complete transaction—not simply the new mortgage.
For a more detailed explanation of how these programs work, mortgage options, potential advantages, and important considerations, visit Jeremy Boillot's Buy Before You Sell guide.
There isn't one answer that works for every homeowner.
The appropriate strategy depends on factors including:
This is why homeowners considering a move should ideally speak with both their mortgage professional and real estate agent before listing their current property or making an offer on the next one.
One of the biggest mistakes move-up buyers can make is waiting until they find the next home to figure out how the transaction will work.
Instead, start by answering three questions:
Can I qualify for the next home before mine sells?
How much equity can I access before the sale?
What financing strategy gives me the strongest position when making an offer?
Once those questions are answered, you can shop for your next home with a much clearer understanding of your options.
Buying before selling doesn't have to mean carrying two mortgages indefinitely or making a rushed move. With the right strategy, homeowners may be able to coordinate the transition while giving themselves more flexibility to find the right property.
If you're considering buying your next home before selling your current one, speak with a qualified mortgage professional early in the process and compare the available options before deciding which approach makes the most sense.
Loan Originator
Barrett Financial | NMLS: 1208591
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