How to Buy a House While Selling Yours
Learn the steps you’ll need to take when buying a new home and selling the one you currently live in.
Bottom Line Up Front
- Decide whether you first want to buy a new home or sell your current one.
- If you decide to buy before you sell, get familiar with the financing options available.
- Make sure you’re working with a knowledgeable real estate agent and a trusted lender.
Time to Read
August 4, 2022
There comes a time in many homeowners’ lives when they feel the urge to pick up and relocate. For those who grew up in a military family, you might get this itch every few years! Whether you’ve got dreams of a larger home or want to relocate to a new area, you’ll need to consider what it means to buy a new home and sell the one you already live in.
Handling one property transaction can be stressful enough—buying and selling back to back is even more complex. Thankfully, there are ways to keep it simple. Here’s what you need to know about how to buy a house while selling the one you already have.
Should You Buy First or Sell First?
The first question you need to ask is whether you want to buy a new home before you sell your current one, or if you want to sell first and buy second. There is no right answer, and everyone’s situation is different. Here’s a look at some of the pros and cons to help contextualize your decision:
Pros and cons of buying first
- PRO: You can continue to live in your current home until you close on your new home.
- PRO: No rush to buy, leaving time to accommodate contingent repairs before closing.
- CON: You’ll need to tap into equity to come up with financing for the down payment.
- CON: You could find yourself on the hook for two mortgages until you sell your home.
Pros and cons of selling first
- PRO: Easy to finance a new home, since you’ll have cash in hand from the sale.
- PRO: You’ll offload the old mortgage before the new one, avoiding double payments.
- CON: You’ll need to find transitionary living while you look for a new house.
- CON: The cost of a month-to-month lease, coupled with a storage unit, can add up fast.
Not sure what to do? Most homeowners opt to buy a new home before selling their old one. It’s often a simpler, more linear process: buy, move and sell. While selling first can simplify the process of financing your next home purchase, it also comes with a more complex timeline. It’s best to talk with a real estate agent—and they’ll likely recommend that you buy before you sell.
How to Buy a House Before Selling One
If you’re choosing the buy-before-you-sell route, there are several strategies you can use to finance your new home purchase. Here are 4 strategies to help you come up with a down payment, so you can finance a new home purchase with confidence.
Option 1: Buy With a Sales Contingency
The safest option is to buy a new home with a sales contingency. This means that the sale of your new home won’t close until you sell your current home. This allows you to use the profits from the sale as the down payment on the new home. A sales contingency also consolidates the timeline for buyers and sellers, since the purchase of one home depends on the sale of another. The downside? Some sellers will turn down offers with sales contingencies if they’re in a hurry to sell.
Option 2: Buy Using a Bridge Loan
A bridge loan is the most common method for buying a new home. A bridge loan uses your current home as collateral, giving you access to its equity in the form of cash for a down payment. Bridge loans can also cover the cost of carrying two mortgages until you sell your current home, making them a smart solution to buying before you sell. Keep in mind that bridge loans tend to come with higher interest rates, and getting one is largely dependent on the amount of equity you have in your home.
Option 3: Buy Using Home Equity
Similar to a bridge loan, you might be able to tap into home equity via a home equity loan (HEL) or line of credit (HELOC). It’s important to note that a HEL and HELOC create a lien, or claim against your home. Typically, HEL or HELOCs are only options for homeowners who have substantial equity in their home.
Option 4: Sell in an Active Market
If your current home is in a hot real estate market and free of any major defects, there’s a good chance you’ll find an eager buyer quickly. If that’s the case, listing your home at the same time you put in an offer on another home can lead to a simultaneous transaction. Technically, this would mean selling your home before you close on a new one; however, the 2 transactions would happen in parallel—similar to a sales contingency clause. Keep in mind that this is a calculated risk: you’re assuming your home will sell quickly. Have a safety net strategy just in case!
Each of these strategies introduces a new wrinkle into a property transaction. That’s why it’s so important to work with a real estate expert you trust and a mortgage lender who understands your situation.
Consult With a Real Estate Expert
Getting ready to buy a house? Trying to figure out when and how to sell the one you already own? The process differs for every homeowner, but there are options to accommodate your situation—no matter what it looks like.
Whether you’re upgrading, downsizing or just relocating, Navy Federal is here to help. Find a qualified real estate agent through RealtyPlus® and take advantage of the many perks that come with the program. And, don’t forget—we’ve got helpful resources for every phase of your home-buying journey.
- Enroll in RealtyPlus to begin the search for a qualified real estate agent who knows the local market. You’ll also qualify for cash-back savings when you buy and/or sell your home!1
- Are you on a timeline to buy or sell? What do your financial resources look like? Would you prefer to buy first and sell after or sell first and buy second? Assess the pros and cons in the context of your situation.
- Investigate home equity financing options such as a bridge loan or HELOC with your mortgage lender. Talk with your real estate agent about which option might be right based on your situation.
The cash-back bonus is offered in most states and is available for individual sales and purchases of property; offer limited to one cash-back bonus per property with no limit on the amount of times you may use the program. In some states, a gift card or commission credit at closing may be provided in lieu of the cash-back bonus. The program is not available in IA or outside the U.S. Cash-back bonus is not available in AK or OK. In KS and TN, a gift card with preloaded points that are ready for spending at specified retail establishments after closing will be issued. State regulations in KS limit the dollar amounts and the type of incentive. In MS, NJ, and OR, a commission reduction may be available at closing. Please check with the program coordinator for details. This is not a solicitation if you are already represented by a real estate broker. The cash-back bonus is only available with the purchase or sale of your home through the use of a program-referred and -approved real estate agent. The size of your cash-back award depends on the value of the property you are buying or selling. Obtaining the full $9,000 cash-back award requires transacting in a property valued at $3 million or greater. To calculate the size of your potential cash back, please visit the RealtyPlus website: https://realestateperk.com/RealtyPlus/. All real estate transactions are negotiable. Contact RealtyPlus for terms and conditions. Standard listing fees apply. The program award is not available in certain transactions with restricted agent commissions (including many new construction, For Sale by Owner, or For Sale by iBuyer transactions). Your assigned agent can help you identify any transactions where the award would not be available. This program is offered, in part, by Realogy Lead Management Services, Inc. d/b/a Realogy Leads Group (RLG). RLG may receive a co-operative brokerage fee as a result of a referral to the real estate companies listed above. Program terms and conditions are subject to change at any time without notice. Additional terms, conditions, and restrictions apply.↵
This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.