Buying and Selling a Home at the Same Time

Many current homeowners may eventually find themselves wanting to sell their home and buy another simultaneously. This dual transaction often requires careful planning, coordination, and a good understanding of real estate market dynamics to ensure both processes work together and create an experience that is as seamless as possible.

There are a couple of steps you can take ahead of time to make the process easier:

• Do your research. Read about pre-planning, timing, and financing options.
• Contact a knowledgeable real estate agent and an experienced mortgage lender to learn more.

We’ve helped many owners and buyers navigate these situations and are ready to help you, too. Contact us with questions, apply online now, and read through the following tips from our mortgage lenders.

Understand your financial situation

Evaluating your finances can help you feel more aware of your financial situation and allow you to calculate the numbers you’ll need to know as part of the home selling and buying process. You may want to include the following as part of your assessment:

• Estimate the amount of equity you have in your current home. Your equity is the difference between your home's market value and the outstanding mortgage balance. It’s the potential profit you could expect from the sale of your home, and it can help you plan a down payment for your new home. You can get a rough estimate of your home’s market value by searching online sites for recently sold homes in your neighborhood that may be similar to your home. You can also contact a real estate agent and have them complete a comparative market analysis, which most agents will do for free as a way to attract your business.
• Review your income, expenses, debts, and savings. This can help you feel more equipped to handle any unforeseen expenses or delays that could occur during the buying or selling process. It can also help you manage risks and avoid potential financial pitfalls, ensuring that a dual transaction home purchase doesn’t affect your financial stability.
• Look at your credit report. Your credit history may have changed since you purchased your current home, so you’ll want to make sure you review your report and its accuracy. You can get one free credit report per year from each of the three major credit bureaus.
• Know how much you can afford. Once you’ve estimated your equity and have a clear picture of your financial situation, you can more confidently explore various financing options, including what mortgage rates you may qualify for, and whether you might need a bridge loan or another financial product (more on this below) to facilitate the transition.

Research the market

Because you’ve purchased a home before, you likely know the real estate market is dynamic and can fluctuate based on various factors, such as economic trends, interest rates, and local demand. Knowing the average selling prices, the current length that homes stay on the market, and the competitiveness of the market can help you:

• Understand the best time to both list your property for sale and make a purchase.
• Set realistic expectations for both parts of the process.
• Price your home appropriately and prepare for potential delays or challenges.
• Negotiate better deals, whether you’re aiming for a higher selling price or seeking favorable terms for your new home purchase.

Learn about strategies and financing

Your market research can also help you better understand the financing options and strategies that your mortgage lender and real estate agent may recommend for you. This could include bridge loans, home equity options, and contingency offers. If you’re interested in learning more about these options, contact us. Even if you’re still in your research phase, we’re happy to answer your questions.

Bridge loan

A bridge loan is a short-term financing solution designed to “bridge” the gap between selling your current home and purchasing a new one. The loan provides immediate funds, allowing you to make a down payment on a new property before selling your existing home. With this option, you wouldn’t need to synchronize your closing dates.

Benefits and considerations

• Flexibility in timing for purchasing a new property without rushing to sell the current home.
• If the market is favoring sellers, this option can make your purchase offer more competitive because it shows you're ready to close on the new home without the condition of selling your current home.
• Potential to secure the best possible price for both transactions.
• Helps prevent the stress associated with temporary housing arrangements during the transition.
• Could be a higher interest rate compared to traditional mortgages.
• You could experience financial strain if your current home doesn't sell within the expected timeframe.

Eligibility criteria

To qualify for a bridge loan, lenders typically require a good credit score, a low debt-to-income ratio, and sufficient equity in your current home. You’ll also need to demonstrate the ability to repay the loan through either the sale of your existing property or other financial means.

Home equity loan and line of credit

A home equity loan and a home equity line of credit both allow you to borrow against the equity you’ve built in your current home. A home equity loan provides a lump sum of money with fixed interest rates and repayment terms, while a home equity line of credit offers a variable interest rate and flexible, revolving access that you can borrow on as needed and repay multiple times (similar to a credit card).

Benefits and considerations

• Lower interest rates compared to other types of loans.
• Interest could be tax deductible. Talk with your tax advisor for more information.
• Could offer a sizeable amount of funds to help with a down payment on a new property before selling your current home.
• Fixed interest rates and repayment terms with a home equity loan can provide more stability, while a home equity line of credit offers more flexibility in the draw period (10 years) and repayment period (15 years after the draw period ends).
• These options often require sufficient equity in your current home to qualify.
• You could experience financial strain if your current home doesn't sell within the expected timeframe.

Contingent offer

A contingent offer, also known as a home sale contingency clause, is a provision in a real estate contract that makes the purchase of a property dependent on certain conditions. For example, when you’re trying to buy a home while also selling your current home, your real estate agent may recommend including a contingency that states you’ll need to sell your current home first, typically within a realistic timeframe. In other words, your ability to close on the new property is contingent upon successfully selling your existing property.

Benefits and considerations

• Allows you time to sell your current home before purchasing a new one.
• If your home doesn’t sell as expected, you may have an option to back out of the purchase agreement without losing your earnest money deposit.
• Helps avoid carrying two mortgages simultaneously.
• Provides flexibility in aligning the sale and purchase timelines.
• Potentially reduces financial strain during the transition period.
• In a competitive market where sellers receive multiple offers, they may prefer to choose an offer that doesn’t include a contingency clause.

Rely on professionals to guide you

Buying and selling a home at the same time can be tricky, and leaning on an experienced real estate agent and mortgage lender for help can make the process easier. We know the market, which strategies work well in what scenarios, and we can help you make informed decisions. A real estate agent can help you negotiate favorable terms and talk through the feasibility of contingencies, while we as the mortgage lender can help you weigh the smartest financing options. Together, we can make the process smoother for you, reduce your stress, and get you from your current home to your new home as quickly as possible.

Learn more about our mortgage loans or contact us today.