Selling your home and buying a new one at the same time can feel like a high-stakes balancing act. How do you manage financing? What about contingencies? And how do you compete in a hot market? In this post, real estate expert Travis Andersen teams up with mortgage pro Peter Lindquist to break down the process, offering practical tips to help you navigate this complex journey with confidence.

Financing Your Next Home While Selling Your Current One

One of the biggest concerns for homeowners is figuring out how to qualify for a new mortgage while still carrying the existing one. Peter explains that the ideal scenario is selling your current home first. This clears your existing mortgage debt and frees up equity for a down payment on your next home. There are two main ways this can play out:

  • Sell, Then Buy: You close on the sale of your home, move into temporary housing (like a rental), and then purchase your new home. While this avoids financial overlap, it’s not always practical.
  • Contingent Purchase: You buy your new home with a contingency that your current home must sell and close first. Often, this means coordinating both closings on the same day—selling in the morning and buying in the afternoon.

Decoding Contingencies in Your Purchase Agreement

Contingencies are conditions in a purchase agreement that must be met for the deal to move forward. Travis outlines the three primary options you’ll encounter:

  • Contingent on Selling Your Home: Your offer depends on listing and selling your current home, which may not yet be on the market. This is uncommon in a strong seller’s market, as sellers prefer offers with less uncertainty.
  • Contingent on Closing Your Sold Home: Your home is already under contract, and your purchase hinges on that sale closing successfully. This is more common and often acceptable, even in competitive markets.
  • Non-Contingent Offer: Your offer isn’t tied to selling your home, making it highly appealing to sellers. This approach requires careful financial planning, which we’ll explore next.

Winning with Non-Contingent Offers in a Seller’s Market

In a competitive seller’s market, non-contingent offers can give you a significant edge, especially in multiple-offer situations. But how do you make an offer without relying on the sale of your current home? Peter shares several strategies:

  • Qualify for Dual Mortgages: You’ll need sufficient income to cover the mortgage, taxes, insurance, and any association dues for both your current and new home until the old one sells. This requires strong financials.
  • Tap Into Savings: If you have liquid assets (e.g., $50,000 in the bank), you can use those funds for the down payment on your new home and replenish them after your current home sells.
  • Borrow Against a 401k: A short-term 401k loan can provide down payment funds without penalties or tax consequences. Best of all, it doesn’t count as debt in your mortgage qualification.
  • Other Options: Family loans, gifts, or selling assets (like a car) can also help bridge the financial gap.

Bridge Financing: Your Secret Weapon

If the above options aren’t feasible, bridge financing can be a powerful tool. A bridge loan is a short-term loan, often secured as a second mortgage on your current home, that provides funds for your new home’s down payment. Here’s what you need to know:

  • How It Works: You borrow against the equity in your current home. For example, if you expect $80,000 from your home sale, a bridge loan might provide $60,000 for your new purchase.
  • Requirements: You’ll need significant equity in your current home and enough income to qualify for three payments: your old mortgage, new mortgage, and the bridge loan.
  • Advantages: Bridge financing allows you to make a non-contingent offer, boosting your chances of securing your dream home in a competitive market.

The catch? Until your current home sells, you’ll be responsible for all three payments, which can be financially demanding. Early communication with your lender is crucial to explore this option and ensure it fits your situation.

Are Contingent Offers Coming Back?

While non-contingent offers dominate in a seller’s market, Travis notes a slight shift. In the Twin Cities, for instance, contingent offers are starting to reappear after nearly a decade of absence. Over the past year, Travis has written a couple of contingent offers, a sign that market dynamics may be softening slightly. However, in most areas, a non-contingent offer remains the strongest strategy.

Strategic Timing to Avoid Bridge Loans

Even if you qualify for bridge financing, you may not need to use it. Travis and Peter recommend preparing your current home for sale before making an offer on a new one. If your offer is accepted, list your home immediately and negotiate a longer closing timeline (e.g., six to eight weeks) on the new purchase. This gives you time to sell your home, potentially eliminating the need for a bridge loan. If your home sells quickly, you can amend the purchase agreement to include a contingency on the closing of your sold home—a less risky condition than a full sale contingency.

Why Early Planning Is Key

The key to success, as both Travis and Peter emphasize, is early planning. Connect with your lender as soon as possible to explore your options. Whether it’s qualifying for dual mortgages, tapping into savings, or securing a bridge loan, a detailed financial strategy can make all the difference. Peter often conducts these discussions via Zoom, walking clients through the numbers and coordinating with multiple loan officers if bridge financing is involved.

Final Thoughts: Take the Stress Out of Selling and Buying

Selling your home and buying a new one doesn’t have to be overwhelming. By understanding contingencies, exploring financing options, and working closely with your real estate and mortgage team, you can navigate the process with confidence. Whether you opt for a contingent offer, go non-contingent with a bridge loan, or use creative financing, the right strategy can help you secure your next home in any market.

Ready to make your move? Contact us today to discuss your options and create a personalized plan. Subscribe to our blog for more real estate insights, and share your questions in the comments below!