How to buy a new house before you sell yours

Whether you’re switching jobs or expanding your family, life changes can mean it’s time to buy a new home and move. If you already own a home, you’ll have the additional job of selling it to buy your new one. Some homeowners choose to buy the new home first to avoid having to move twice. However, this comes with new financial considerations. You’ll need to come up with the money to make a down payment and close and you could end up with having to pay two mortgages in the interim. Here, we’ll walk you through your financing options for buying a new house before you sell your current one to help make the process a little less stressful.

Coming up with a down payment before selling

Two of the biggest challenges of buying a new home and selling your current one are securing a down payment and managing your debt-to-income ratio (DTI) while holding two properties. While you may have built a considerable of equity in your current home, that money isn’t liquid until you sell it. Many homeowners don’t have enough in savings to use for a down payment without wiping out their emergency fund.

Ways to buy a house before selling

Let’s go over some ways you can finance buying a house before selling the one you have now.

1.  Borrow your home equity

As you’ve been paying off the mortgage on your current home, you’ve been building equity – which is the amount of the home you actually own. You can calculate the amount of equity you have by taking the current market value of the home and subtracting how much you still owe on your mortgage. While your equity isn’t liquid, you can borrow against your equity to make a down payment on a new home.

One option is a home equity loan, which is a second mortgage that uses your home as collateral to borrow a lump sum. A home equity line of credit (HELOC) is a similar second mortgage option to borrow a revolving line of credit that you can draw from more than once. Note that Rocket MortgageÒ does not offer HELOCs at this time, but we do offer a Home Equity Loan. Get in touch with a Home Loan Expert or apply online.

Using your home as collateral reduces the risk for the lender and as a result, it typically get access to a lower interest rate. Plus, if you use the money to buy or improve a home, the interest is tax deductible.

However, the downside to using your home as collateral to take out a second mortgage is that you could risk foreclosure on your home if you can’t keep up with both monthly payments. Once you sell your current home, you can use the money to pay off the second mortgage. However, if your home takes a while to sell, you’ll be stuck with two monthly payments, and your credit score could suffer carrying all that debt for an extended period.

2.  Mortgage recasting

Mortgage recasting allows you to make a lump sum payment to your mortgage, and then the lender recalculates your payment schedule and reduces your monthly payment. A mortgage recast can be used after you’ve bought a new home and the previous home sells. You can used the proceeds from the sale to reduce the monthly payment on your new mortgage. It’s similar to a refinance, except you don’t have to pay closing costs or change your interest rate. However, lenders still typically charge a fee for a recast, and not all loan types are eligible.

3.  Bridge loan

A bridge loan is a type of financing that’s designed to cover the gap between buying a new home and selling your old one. Taking out a bridge loan gives you the money you need to make a down payment and close on your new home. You could also take out a bridge loan large enough to pay of your current mortgage and make a down payment, leaving you with only one mortgage payment. Bridge loans typically come with short terms of 6 months to a year.

A downside to bridge loans is that they often carry higher interest rates than primary mortgages. Because your home is used as collateral, you could risk foreclosure if you can’t repay your bridge loan.

Rocket Mortgage offers 6-month bridge loans of up to $500,000.

4.  Take a loan from your 401(k)

It’s typically not advisable to withdraw from your 401(k) before you turn 59 ½ years old or it will be taxed as income and you’ll have to pay a 10% penalty. However, the IRS makes an exception if you’re using the money to purchase a primary residence. You could also borrow against your 401(k) by taking out a 401(k) loan. With this option, you don’t have to pay a penalty, but you to have to repay the loan. Some retirement plans allow you to borrow up to 50% of the vested balance. However, if you leave your job you may have to immediately repay the loan. Keep in mind with either option that taking money out of your 401(k) reduces its long-term growth.

5.  Cash-out refinance

With a cash-out refinance, you pay off your mortgage with a larger loan and withdraw the difference in cash. This is another way to use the equity you’ve built to make a down payment on a new home. However, keep in mind that you’ll have to pay closing costs that can range from 3% to 6% of your total loan amount. Your interest rate will also change and could increase or decrease depending on market conditions. Still, your interest rate on a cash-out refinance will typically be lower than the interest rate you’d get with a HELOC.

6.  Get a gift from family

Many lenders allow contributions from your family to be made toward your loan payment. Gift money can come from anyone who is related to you by blood, marriage, domestic partnership, adoption, or legal guardianship. This includes relatives of the borrower or domestic partner, former relatives, spouses, godparents, children, or anyone engaged to the borrower. You’ll need to provide a gift letter signed by the donor that includes the gift amount along with confirmation that it does not need to be repaid.

7.  Sale-leaseback contingency

A sale-leaseback contingency is a way you can sell your home and then stay in it as a renter temporarily. You’ll be able to access the cash from the sale to buy your new home and avoid moving twice. However, it’s possible that your rent will be higher than your mortgage payment. A contingency is a condition that must be met for the sale to go through, or else you’ll be able to back out the deal without penalty. The downside is that contingent offers can be more difficult to negotiate, and you’ll have to find a buyer who agrees to these terms.

8.  Securities-backed line of credit (SBLOC)

A securities-backed line of credit (SBLOC) is a way you can use investments as collateral for a short-term loan. Instead of selling stocks, mutual funds, or exchange-traded funds (ETFs) to come up with the cash for a down payment, you can keep the investments and borrow against their value to get a line of credit. Because you’re using collateral to borrow money, you’ll typically get a better interest rate than other loan types. However, lenders may require that your investments hold a minimum current value to be eligible. 

Pros and cons of buying before selling

Buying a new home before you’ve sold your current home comes with advantages and drawbacks. Here’s are some pros and cons to consider.

Pros

Some of the perks of buying a home before selling include:

• Securing your new home without rushing
• Avoiding making multiple moves and needing temporary storage
• Moving quickly when you find the right home

Cons

• Less liquidity and higher monthly costs
• You’ll have two monthly mortgage payments if sale takes longer
• Savings could deplete if your home sells slower or for less

FAQ about buying a home before selling a home

Let’s take a look at some of the frequently asked questions about buying a house before selling your current home.

How can you put an offer on a house before selling yours?

You can put in an offer on a house before selling yours by getting a bridge loan, home equity loan, HELOC, SBLOC, or cash-out refinance. You could also recast your current mortgage or include a sale-leaseback contingency to help finance your purpose.

How long is a bridge loan?

Bridge loans are designed to be short-term loans and typically have terms of six months to a year.

How long should you own a home before selling?

It’s typically advised that homeowners own their home for at least 5 years before selling to breakeven on the up-front costs, build equity, and avoid capital gains.

How many houses should you look at before you buy one?

There’s no set minimum number of houses you should tour before making an offer. However, it can be helpful to compare different homes in your price range to see what’s available and what your money can get you. That way, you can compare home prices with their locations and features.

How long does it take to buy a house?

From start to finish, the home buying process can take anywhere from 6 months to a year, depending on the market and the type of home you’re looking for. Once you’ve been approved for a mortgage, it often takes 45 – 60 days before you close on the home. If you don’t need a mortgage and are buying a home with cash, the process can be completed in as little as 2 weeks.

The bottom line: Buying first means planning 

Buying a home before selling your current home requires more considerations than buying your first home. The good news is there are multiple financing options available to help you come up with the money for a down payment. For many buyers, it’s worthwhile to borrow money with a short-term loan to avoid moving twice. Once your house sells, you use the proceeds to pay off the loan.

If you’re ready to buy a new home, get started on finding the right mortgage for you today.

Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

Refinancing may increase finance charges over the life of the loan.