Buy a New Home Before Selling Your Old One Using The Departing Residence Program

Buying a new home is exciting, but selling your current property first can create complications. If you’re worried about juggling both selling and buying a property at the same time, there’s a solution: the departing residence program. In this post, we’ll break down everything you need to know about buying a new home before selling your old one, including the different financing options and the departing residence program that might be the perfect fit for you.

Different Options To Choose From

1. Departing Residence Program: The Best Solution for Most Buyers

The best option for many buyers is the Departing Resident Program. This program helps you qualify for your new home by excluding the debt on your current property. Instead of factoring in the mortgage on your old house, you can leave that debt out of your qualifications for the new loan.

To use the departing residence program, there are two main conditions:

• Rent Your Current Property: If you plan to rent your existing property, you’ll need a lease agreement and a security deposit that demonstrates the renter will move in within 60 days of your departure.
• List Your Home for Sale: If you plan to sell your current home, you need a listing agreement that demonstrates your commitment to selling your property within 2 months of moving into your new home.

This program works particularly well in markets where homes sell quickly, allowing you to buy your next property without worrying about selling your old one first. Although this option is more expensive, it offers significant flexibility and may be the best solution for buyers in seller’s markets.

2. Sell First, Then Buy: The Traditional Approach

Another option is to sell your current property first, then purchase your new one. This might seem like a straightforward approach, but there are some logistical challenges to consider.

If you’re flexible with where you live, this could be an option. Consider temporarily staying with family or renting a place until you find your new home. However, the downside is that this could become a logistical nightmare, especially if you need to store your belongings, move between homes, or relocate to a different city. If you’re selling your home and then buying, you could end up moving multiple times, which can be stressful and inconvenient.

3. Qualify for Both Mortgages Simultaneously

If you have a substantial income and good credit, you can qualify for both your existing mortgage and a new loan for your next property. This could be the easiest option if you have enough financial resources to manage both payments.

However, not everyone can afford two mortgages, especially with rising home prices and higher interest rates. For example, if you’re upgrading from a $1 million loan to a $1.5 million loan, the difference in monthly payments can be significant. So, while this is the easiest option if you’re financially able, it’s not always realistic for everyone.

4. Bridge Loan: A Quick Fix with a Price

Another solution is a bridge loan. This type of loan allows you to borrow against the equity in your existing home to purchase a new property before selling your current home. Bridge loans are fast, often closing in as little as 10 days, and allow you to act quickly in a competitive market.

However, bridge loans are expensive. They carry higher interest rates and fees (often 2 points) and are intended as short-term solutions. If you don’t have enough equity in your current home or don’t have the cash available for a down payment, a bridge loan may not be the best choice. Additionally, bridge loans are typically used only for higher-priced properties—usually over $2 million—so they might not be an option for lower-priced homes.

Which Option is Right for You?

If you’re considering buying a new home before selling your old one, it’s essential to explore all of your options and understand the pros and cons of each. Whether you choose to sell first, qualify for both mortgages, take out a bridge loan, or use the departing residence program, it’s crucial to carefully weigh the financial implications and find a solution that fits your needs.

The departing residence program is an excellent option for many homeowners, especially in today’s competitive real estate market. If you have any questions about buying a new home before selling your old one, or if you’d like help exploring financing options, don’t hesitate to reach out. I’m happy to help you run the numbers and ensure you’re confident in your home-buying decision.