Like the seasons of the year, there are seasons of our lives when our housing needs transition too. A key leap is when you realize the need to move to a new house and sell your current one. Most of the time, this switch is because your family is growing and you need more space, or on the other end of the spectrum when your children have moved out, and you’re looking to downsize.

Once you’ve decided you want to move to a different home, you’re onto the seemingly daunting task of selling your previous home, coordinating a new purchase, and figuring out how you’ll handle moving your belongings.

It may feel like too much to organize, but it’s more doable than you might think. Your first step will involve planning for the financial aspect of buying and selling a home at the same time. You’ll want to seek out a trusted lender who will help with this important part of the process. You’ll also need an experienced real estate agent to help list your home and find a new one that’s just what you’re looking for. After that, you can utilize one of a few different strategies to carry out your purchase and sale. Let’s walk through what the process entails so that you’re ready to tackle the move to your new home.

Consider the Financial Impact of Buying While Selling

Preparing to buy a new home while putting your current residence up for sale will start off similarly to how you’d prepare for a standard home purchase: developing your budget.

You’ll want to know how much equity you have in the house you’re selling and the price range it’s likely to sell for. This will give you an idea of how much cash you’ll be able to bring to your new home purchase. Your equity is the difference between your home’s current value and any mortgage still outstanding on the home.

With an estimate of how much money you’ll have to put toward your new home financing, you can then start working with a lender to get pre-qualified. Your loan officer will provide different loan options for financing your purchase and help you find the best way to utilize your current home equity. They will advise you on the minimum cash you’ll need to close on your new home and explain any short-term financing options, like a bridge loan, that might be necessary for your financial situation.

Work with a Trusted Lender and Real Estate Agent

Buying a home and selling your current one is no easy task to handle on your own. It will require precise timing, planning, execution, and industry expertise.

On top of planning your budget, you’ll also want to know an estimate of how quickly you’ll be able to sell your current house and how market conditions will impact your timeline to close on a new one.

While the financial aspect may be the most important, timing is right behind that. Your timeline will even impact what financing options you end up using. Working with an experienced real estate agent is the best way to tackle buying while also selling. They’ll be up-to-speed on market conditions and trends. This enables them to help you develop a realistic timeline to work with.

While you’re building a relationship with a trusted agent, you’ll also need to start working with a lender that specializes in helping homeowners sell their homes while buying new ones. They will help you evaluate your financial position and outline the best routes to getting you into your new dream home.

With an estimate of what you’ll make from selling your home, pre-qualification from your lender, and a top-tier real estate agent, you’ll be on solid footing to finalize your new home search, make an offer, and get everything in motion for your move to your new home.

Different Financial Situations Buyers Face When Buying While Selling

At this point, you’re well-versed on the process you’ll encounter when buying and selling at the same time. The next phase of your planning will focus on making the financials of the two transactions work.

There are a few different scenarios you might find yourself in.

  • Your current home is paid off, and you have enough funds available to pay for the costs associated with your new home. If this is you, then your journey may be pretty straightforward. You’ll work with your real estate agent to find a new home and your lender to handle the financing. Then, either during or after the purchase, you’ll list your previous property.
  • Your old home is paid off, but you need to utilize the equity you have in it to pay for the down payment and closing costs of your new home. In this scenario, you could take out a home equity loan, or use a short-term financing tool like a bridge loan, to provide access to temporary funds which you’ll repay after selling your home.
  • You still have a mortgage on your previous home, and you need to tap into your home equity to finance your new home. This is another situation where a bridge loan might be the right option to help you afford the costs of buying and selling at the same time with access to temporary funds.

While not every homeowner will fit into these circumstances, they cover the majority of buyers purchasing a home and selling their existing one at the same time. And for any more nuanced situations, your loan officer can help you decide on the perfect plan to support your goals.

Bridge Loans and Other Financing Options

In many cases of buying a home while selling when you don’t have funds at the ready for the purchase, a bridge loan is a handy tool to literally help you bridge the gap.

A bridge loan is a short-term mortgage option intended to finance your transition from your current to new home. You can take out a bridge loan for a range of six months to a year, depending on your lender’s programs. It can be used to cover your down payment, closing costs, and other costs associated with the new mortgage. Once you’ve settled into your new home and have sold your old one, you’ll pay off the bridge loan with the proceeds from the sale.

A bridge loan may not be the only option to help with your cash flow between the transactions. If you already have a HELOC, you could draw against that, or you may be able to take out a home equity loan if your previous home was already paid off.

You might even be able to make the transition work without any additional financing if you’re able to afford the costs of a low-down-payment mortgage program, like an FHA, USDA, or VA loan, without tapping into your home equity.

As a last resort, you could check into the possibility of borrowing against investment or retirement accounts if no other financing options seem viable after talking through your situation with a loan officer. Of course, you’ll want to also speak with your personal financial advisor to fully understand the implications of these transactions.

From our look into the process of buying a home while selling another, you now know that it is possible, and many homeowners make it happen every year. A strong game plan and trusted partners, like your real estate agent and loan officer, are integral to your success and keeping it stress-free. Start the pre-qualification process with our team today.

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The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 12/2/2021.