3 Tips for Buying a House Before Selling From a Financial Planner

Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

• Buying a new home before you’ve sold the old one is hard, but planning early makes it easier.
• Remember, you’ll have more success if your house is appealing to buyers.
• Lenders are salespeople, so it’s a good idea to talk to an expert who can offer objective advice.
• Reduce your risk when you buy before you sell with a guaranteed backup offer from Calque. Get your quote today. 

Two years ago, during the peak of the real estate market madness, I had a dilemma. I needed to sell my first home to afford a new one.

Not only did I need the proceeds from my first home for a down payment on the next, I couldn’t afford two mortgages, and I didn’t have a place to stay should the space between selling and buying a home take longer than I expected. Oh, and no one was interested in accepting a contingency offer. When I looked for a solution to this quandary, I found no answers.

I found this frustrating, because I knew there was no way my situation was unique. I wanted to finally get those answers for anyone in a similar bind, so I chatted with Certified Financial Planner Tammy Trenta, the Founder and CEO of Family Financial, LLC. She offered this advice to anyone trying to sell their first home in order to afford a new one.

1. Make a plan ahead of time

First, Trenta said the ideal solution is to get ahead of it. I can attest to this, as someone who spent the final five years in my first home knowing full well I’d be ready for an upgrade eventually. I have no idea why we didn’t start preparing ourselves sooner because if we had, we could have at least budgeted to stay in an Airbnb for the interim.

Trenta suggested building your plan for a new house into your budget ahead of time and saving as much as possible toward a solid down payment. For a lender to trust you with a new mortgage before you’ve sold your house, they need to look at your bank account and see that you’re good for it.

Trenta had a few ideas for beefing up your accounts for this review. Beyond savings, you can always take money out of your 401(k). This isn’t the best option, as you will have to pay taxes on it, but it’s one option for having enough cash on hand to buy before you’ve successfully sold. Trenta also suggested asking for a loan from parents or grandparents who can afford it and paying them back with the proceeds of your first home.

This can be tricky due to taxes and gift letters, and many may not have access to this kind of wealth, but if you do, Trenta suggests having it in your account for a few months prior to applying for a mortgage.

Another option that didn’t work for me, but is wholly dependent on your local real estate market, is taking the contingency offer route. If you are looking to buy in an area where there aren’t immediate bidding wars over every house that hits the market, you may be in a solid position to make your offer contingent on the sale of your first house. When sellers have 15 offers, the risk of a contingency is simply unappealing. Still, if a house has been sitting with no offers for a few weeks, any offer will be attractive enough to garner a second look.

2. Make it easier to sell your home

There are other ways you can make it easier to sell your first home to afford a new one. I also asked Trenta for her tips on the selling side of the equation. She suggested strategically investing in renovations and home improvement to increase the value of your home and enhance its appeal.

Trenta said that one affordable way to do this is to stage. If your home is sitting empty, help potential buyers envision the purpose of a room by adding a few tasteful pieces of furniture.

If you’re still in your house, as I was when trying to sell mine, simple things like a few bags of dark mulch in the flower beds go a long way.

3. Talk to an expert

Finally, Trenta highly suggests talking to a registered investment advisor. She said that lenders are ultimately salespeople, and you’re looking for someone objective to advise through this process. Mortgage rates have increased dramatically over the last 18 months, so if you’re selling and buying as a means to an upgrade, you may find yourself paying significantly more for the same loan amount.

Explore different mortgage options to make your home more affordable. Consider programs that offer lower interest rates, down payment assistance, or favorable terms. An investment advisor is a great way to navigate these choices well. After all, buying a home is one of the most important investments you’ll ever make; why not find an expert to guide you through the process?

Next Steps: Calculate how much equity you could convert into a down payment on your next home if you buy before you sell with Calque.