How To Buy A House Before You Sell

Buying a new home without going through the hassle of selling an existing home (and the risk of homelessness) is something that most sellers desperately want to do.

I know this because of the surprising (and even shocking) popularity of our bridge loans. In light of that, I wanted to highlight and summarize the best options for people who want to buy before they sell.

Four Ways to Buy Before You Sell

Home Equity Line of Credit (HELOC)

I have been recommending that sellers get HELOCs before they list their properties for years now. HELOCs allow sellers to access funds for home improvements for their existing home (to make it more marketable) and for down payments and closing costs for the new home. They are also very low cost or free in most cases, and interest is only accrued if funds are actually borrowed (as a reminder, HELOC borrowers have no obligation to “draw” on or borrow against HELOCs). Homeowners have little to lose by applying for a HELOC, but they will not be able to get one once their home is listed.

EasyPath

I have blogged about our EasyPath option several times over the last month. This option does NOT provide any funds. What it does do is enable people to eliminate the housing payment for their departing residence, thus making it far easier to qualify for financing for a new residence without having to sell their current residence. EasyPath simply offers a guarantee to purchase the departing residence if a person cannot sell it within 120 days – and that guarantee is all underwriters need to see to enable borrowers to eliminate departing residence housing payments. EasyPath charges $2,500 for this guarantee.

Bridge Loans

Many bridge loan options offer cash against a departing residence, but our most popular option (by far) works like this: our bridge lender will loan up to 75% of the value of the departing residence, taking out the existing first mortgage and providing cash to the homeowner – with NO payments due! The “no payments due” aspect along with the cash is what allows people to qualify for financing to purchase a new residence. The fee for these loans though is 2.3% to 2.4% (depending on area) of the total sale price of the departing residence when it does sell. While this fee may seem high, it still ends up being lower than the total interest and fees often charged for other types of bridge loans.

Do Nothing.

This is a reminder that we often get well-heeled borrowers who can easily qualify to finance the purchase of another home without selling their existing home or doing anything else. These borrowers either have substantial income, substantial liquid funds, and/or a very low housing payment for their existing residence.