Buying and selling a home at the same time

Three ways to sequence it

Every move-up is a trade-off between certainty and convenience. Choose the order after you know your numbers.

Qualifying with two homes

Lenders look at your debt-to-income ratio. If your current home is pending sale but will not close before the new purchase, Fannie Mae requires the lender to count both the current and the proposed monthly housing payments, including taxes, insurance and any association fees. The exception: the lender may leave out the current home’s payment if it has the executed sales contract for that home and confirmation that the buyer’s financing contingencies have been cleared.

In practice this means that once your current home has an executed sales contract and your lender confirms the buyer’s financing contingencies have cleared, the lender can often qualify you on the new payment alone. A buyer’s mortgage commitment alone is not that confirmation. Until then you need income that covers both, or a plan for the gap. Rules differ for other loan types, so ask your lender to run your actual numbers in writing. If you plan to keep the old home as a rental instead of selling, see our guide on moving up and keeping a rental.

Bridge loans and home equity lines

If you need equity from the current home for the down payment before it sells, there are two common tools. A bridge loan is short-term financing, often secured by the current home; federal ability-to-repay rules exempt temporary or bridge loans with a term of 12 months or less, such as one used to buy a new home when the borrower plans to sell the current one within 12 months. Ask the lender for the actual term, collateral and conditions. A home equity line of credit, or HELOC, lets you borrow against the current home as you need it.

Both are secured by your current home, so if you cannot repay you could lose it. Fannie Mae treats a bridge loan as a debt in your ratios unless the current home has an executed sales contract with financing contingencies cleared. The CFPB notes that when you sell, you are generally required to pay off a HELOC in full at once, and that if you are likely to sell soon you should weigh whether its up-front costs are worth paying. If you plan to use one, ask the lender before you list whether it will still open a line once the home is on the market.

Ask each lender for the fees, rate, term, payment while the loan is outstanding, and what happens if the old home has not sold when the term ends. Compare that cost with the alternatives: selling first, a sale contingency, or a smaller down payment on the new loan.

Offers with a sale contingency

A sale contingency makes your purchase depend on selling your current home by a stated date. It protects you from owning two homes, and it makes your offer weaker in a competitive market, because the seller takes on the risk of your sale. It works best when your home is already under agreement, when the market for the home you are buying is slower, or when it is paired with a strong price and short dates.

If you use one, write it tightly: the address of the home you are selling, whether it must be under agreement or closed, the date, and what happens if the date passes. Price your current home realistically from recent sales, since your purchase now depends on it; see our pricing guide.

Same-day closings and rent-backs

A same-day closing schedules the sale of your current home first and the purchase second, usually a few hours apart, so the sale proceeds can be wired to the purchase. It works when both attorneys and both lenders commit to the timing. Leave margin: ask the attorneys to confirm that the sale will fund and record before the purchase closes, sign as many documents in advance as the lenders allow, and keep a plan for a one- or two-day slip, such as movers who can hold your things overnight. Verify any wiring instructions by calling the attorney at a number you already have. After your old loan is paid off, its lender must, within 45 days, either record a discharge or deliver a recordable discharge to the closing attorney or settlement agent.

A rent-back, or use and occupancy agreement, lets the seller stay in the home for a short time after closing. If you are selling, it can give you time to move into your new home; if you are buying, you may be asked to grant one. Have the attorneys write it: the number of days, the daily charge, who pays utilities, any amount held back from the proceeds until the seller leaves, the condition of the home at move-out, and the charge for staying late. Ask your lender how long a rent-back it will accept on a loan for a home you plan to occupy, and tell both insurers who is living in the home on which dates.

A sample timeline

Every transaction runs on its own contract dates. Many Massachusetts purchases take roughly six to eight weeks from accepted offer to closing, so a linked sale and purchase is usually planned over two to three months. A typical order looks like this.

• Before anything: get a written pre-approval that shows how you qualify with and without the current home, and an estimate of your net sale proceeds from your attorney.
• Prepare and list the current home, and start touring at the same time so you know what you will buy.
• Accept an offer on your home with a closing date that leaves room to buy, or with a short rent-back.
• Make your purchase offer. If your buyer’s financing contingency has not cleared, use a sale contingency or a bridge plan.
• Once your buyer’s financing contingency has cleared, send the signed sales contract and that confirmation to your own lender so it can consider dropping the old payment from your ratios.
• Set the two closings with both attorneys, same day or a few days apart, and book movers with flexibility.
• After both closings, record your homestead declaration on the new home and update your insurance and mailing address.