Our evaluations and opinions are not influenced by our advertising relationships, but we may earn a commission from our partners’ links. This content is created independently from TIME’s editorial staff. Learn more.
Moving is always stressful and expensive, but that's especially true when you're trying to buy a new home and sell your old one at the same time. There are costs involved on both sides of the equation, so you'll need cash flow to make both ends of the deal go through. You may even have the down payment for your new home tied up in your old one, necessitating a situation where you close on your old one before your new home, yet somehow have a place to live in between.
If you're trying to sell a home and buy another one over the same general timeline, you'll need to get the timing just right. This guide goes over the exact steps you can take to buy and sell a home at the same time without winding up with multiple mortgage payments or no place to live.
5 steps on how to buy and sell at the same time
While some homeowners cannot imagine selling their home without having a new property to move into, others need to unlock their home equity so they can purchase another property in the first place. That said, many homeowners are able to line up both transactions so they can move directly out of one home and into another.
If your goal is making the process as seamless as possible, here's a rundown of the steps you'll want to take.
Step 1: Prepare your home for sale
First, you'll want to make sure the home you live in is ready for a quick and easy sale. You can do this by hiring a listing agent who will market your home and publish it on a Multiple Listing Service (MLS) once it's ready.
Note that you may need to make an initial financial investment in your home in order to expedite a sale or get top dollar. It's not uncommon for sellers to replace aging home components (e.g. HVAC system, water heater, etc.) before they list their home for sale, nor is it uncommon to spend time and money painting or replacing aging and dated flooring.
Your listing agent will also suggest you spend some time decluttering your home and removing personal items like family photos. Finally, your home will need a deep and thorough cleaning before you list it for sale.
Step 2: Get your new home financing lined up
Next, you'll want to take steps to get pre-approved for a mortgage. And with today's housing market still incredibly competitive, you'll need to make sure your new mortgage pre-approval does not hinge on you selling your current home first.
To complete this step, you should take the time to compare mortgage rates with a handful of the best home lenders. From there, you can apply for mortgage pre-approval by submitting a formal application along with your personal and financial information.
The pre-approval letter from your mortgage company will show home sellers your financial strength as well as how much you can afford to spend. Ultimately, this will give you a leg up as you work toward getting an approved offer for a new home.
Step 3: Work out a temporary financial solution for your down payment
If you have a significant down payment to purchase a new home without selling your old one, you're already good to go. Note that, since you're not a first-time home buyer, you'll need to have a down payment of at least 5% to buy another home, or a 20% down payment if you want to avoid paying private mortgage insurance (PMI) on your new mortgage.
If the down payment on your new home is "locked up" in your old home, on the other hand, you'll need to figure out a way to fund your new home purchase that doesn't rely on you closing your home sale before you buy.
Temporary financial tools that can help include:
- 401(k) loan: While this shouldn't be your first option, it's possible to borrow money from a 401(k) retirement account if your plan administrator allows it. This type of loan lets you borrow against your retirement savings and pay yourself back (plus interest) over time. Just keep in mind that the amount you can borrow will vary based on your plan administrator's rules, and that you may have to repay the loan in full right away if you lose or leave your job.
- Bridge loan: A bridge loan is a temporary financial arrangement that lets you buy a new home without selling your old one. It's important to know these loans use your current home as collateral, and they are only meant to last a short amount of time (six months to one year). Interest charges tend to be higher with these loans as well, although the terms and conditions will vary by lender.
- Home equity line of credit (HELOC): A home equity line of credit uses your original home as collateral and lets you access cash as you need it. These lines of credit come with a variable interest rate, and your monthly payment is based on how much capital you access up to your limit. A HELOC can be a good option for your new home's down payment since these loans don't require points and other significant financing charges.
- Home equity loan: Finally, you can consider a home equity loan that comes with a fixed interest rate, a fixed monthly payment and a fixed repayment term that will not change. These loans also use your original home as collateral, and they make it possible to tap into your home equity without selling.
Step 4: Get the timing right
While this isn't always the case, it may be possible to time your home's sale and new home purchase so they fall over a similar timeline, or even on the same day. An experienced real estate agent can walk you through the steps to take to get the timing perfect for your lifestyle and your finances.
For example, you might begin negotiating a home purchase at the same time your home hits the market. If you get a few offers on your home and line up a deal within the same week as your home purchase agreement is finalized, you might be able to do both closings within the same time period.
If you manage to sell a home and close on your new one on the exact same day, you may be able to move directly from one home into another. In this scenario, however, the money transfer you get from selling your home would need to hit your bank account before you could use the money toward the down payment and closing costs on your new home.
If you have to close on your old home several days or weeks before you close on your new one, you'll have to get creative when it comes to what to do while you wait.
Potential solutions include:
- Renting temporary moving containers or a moving truck to store your furniture and belongings and staying in a hotel, or with family and friends
- Renting a short-term apartment that is spacious enough to store your furniture and personal items, too
- Negotiating a "rent back" agreement with your home's buyer so you can stay until your new home's closing for an agreed upon cost
Warning: While setting up a rent-back agreement with your homebuyer may seem like the best option when you have to sell before you buy, you should note that not all buyers will be willing or able to facilitate this type of agreement. There are also risks involved, including the risk the home will become damaged during the rental period.
Buying a house before selling — pros and cons
In some scenarios, it can make sense to go ahead and purchase a new home without selling your old one first. However, not everyone can pull off this financial move without consequences, nor can everyone afford it.
Pros and cons of buying a house while you still own your old one include the following:
|Pros of buying before selling||Cons of buying before selling|
Pros of buying before selling
- Moving becomes a much simpler process. When you buy your new home before you sell your old one, you can switch houses at your own pace. If you are moving in the same general area, you may be able to save on moving costs by packing up and transporting many of your belongings on your own.
- You won't have to find a temporary place to live or store your belongings. Buying a house before selling also saves you from becoming homeless for a short period of time, and from having to pay for storage for your furniture and household items.
- More wiggle room if something goes wrong with the timeline. Buying a home before selling your old one means you don't have to line up the closing on both homes perfectly. If something goes wrong, such as a delay in the closing date for either home, you won't be scrambling to figure out a solution.
Cons of buying before selling
- You can end up with two mortgage payments for the long haul. If you buy a new home and wind up struggling to sell your old one, you can wind up with two home loans and more than one loan payment to deal with. This could go on for months, or even years.
- More work to come up with a down payment on the new home. Buying a new home without selling means you have to come up with the cash for your second home purchase separate from your home sale. If you don't have 20% to put down on your new home and you're using a conventional mortgage, this could leave you paying private mortgage insurance (PMI).
- Potential difficulties qualifying for the second home purchase. Lenders may not be able to approve you for a second home purchase if you don't have plans to sell your first property yet. Even the best home lenders will gauge your ability to qualify based on your income, your debt-to-income ratio and other factors.
Selling a house before buying — pros and cons
In some scenarios, it can make sense to sell your home and cash out before you set up closing for a new one. There are even times when the steps have to take place in this order, such as when a mortgage lender says your income isn't high enough to manage two home loans at a time.
Pros and cons of selling your old home before buying include the following:
|Pros of selling before buying||Cons of selling before buying|
Pros of selling before buying
- Access your home equity to use for a new home purchase. If you have considerable home equity in your old home, selling it first lets you access that cash for the down payment on your new home.
- Helps you avoid paying more than one loan payment. When you sell your old home before you buy a new one, you avoid getting stuck with multiple home loans for an indeterminate amount of time.
- Makes getting approved for a new home loan much easier. Selling before you buy means you don't have to qualify for two mortgages at once. This can make moving much easier for people with lower or average incomes.
Cons of selling before buying
- Several moves required. When you sell a home before you buy a new one, you'll have to move at least twice — out of your old home to temporary storage, then from storage to the new home you purchase.
- You'll be left in limbo. Let's say you sell your old home but can't seem to lock in a deal on a new one you can afford. What would you do then?
- You’ll need a temporary place to live. Selling before you buy will require you to pay for a hotel stay or apartment in the short-term if you can't stay with friends. If you can't get a new home lined up for a while, this situation could become uncomfortable, costly or both.
The right way is your way
There is no "right" or "wrong" way to buy a home and sell your old one at the same time, but there are steps you can take to make the process less expensive, less stressful and more convenient overall. Obviously, lining up the closing for both properties on the same day can be advantageous, but even that leaves you managing two important transactions simultaneously with almost no room for error, then having to move houses on the same day.
Regardless of whether you want to try to do both at the same time or move one transaction along before the other, the best thing you can do is make sure you are financially equipped for buying a new property and all it entails. This means checking your credit score, saving up a significant amount of cash reserves and getting pre-approved for a mortgage, so you know exactly what you can afford.
Once you have your financial ducks in a row, the best home lenders can help set up the rest.
Frequently asked questions (FAQs)
What to do if you don’t qualify to finance a purchase until the sale on your first home closes?
If your income isn't high enough to qualify for a second mortgage before you sell a property, you'll have to sell your old home before you buy a new one. In this case, you'll need to find a temporary place to live and store your belongings while you search for a new home.
How can I buy a house if I need to sell the house I’m in to afford a down payment?
Several financial products can help you tap into your home equity or buy a new home while trying to sell your old one. For example, you can look into bridge loans, home equity loans, home equity lines of credit (HELOCs), and borrowing from your 401(k).
Can I put an offer on a house if mine hasn’t sold?
You can put an offer on your house if your old one hasn't sold, but you'll want to get pre-approved for a new mortgage first. In some cases, however, a lender will pre-approve you for a new mortgage with a sales contingency. This means you can only buy a new home if your old home is sold first.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.