To buy a home while selling yours, you generally need to know how much equity your current house will produce, get pre-approved for the new mortgage on that basis, write contingencies into the purchase contract that protect you if your sale falls through, and sequence the two closings so the proceeds from selling fund the purchase. Most homeowners move once by lining those pieces up carefully; the rest use a bridge loan, HELOC, or rent-back to cover the gap when the dates don’t cooperate.
Figure Out Your Equity Before You Shop
Start with the cash you’ll actually walk away with. Take your home’s estimated market value, subtract the mortgage payoff, and subtract selling costs: your listing agent’s commission, transfer taxes, title insurance, and other settlement fees. Sellers typically pay somewhere between 1% and 6% of the sale price in closing costs beyond commissions, depending on the state. Since the 2024 changes to real estate commission practices, sellers generally negotiate and pay only their own listing agent’s fee rather than covering the buyer’s agent too, though many still offer buyer-agent compensation as an incentive. Whatever remains after all deductions is what you have available for a down payment on the next house.
That number drives everything else. If it’s smaller than you thought, you may need bridge financing or a smaller purchase. If it’s larger, you have room to make a stronger offer or waive contingencies later.
Get Pre-Approved for a Concurrent Transaction
Lenders evaluate your ability to buy the next home using the Uniform Residential Loan Application, Form 1003, which captures your income, assets, debts, and monthly obligations.1Fannie Mae. Uniform Residential Loan Application (Form 1003) When you’re buying and selling at once, the underwriter needs to confirm you can carry two mortgage payments simultaneously, or needs to see that the new loan is conditional on your current sale closing first.
Bring a recent mortgage statement showing your payoff balance and a preliminary settlement estimate from your listing agent so the lender can verify your equity figures. Two years of tax returns and recent pay stubs cover the income side. A pre-approval letter for a concurrent transaction will note that the loan commitment depends on the successful sale of your existing home. That letter tells sellers you have real financing behind your offer. Getting pre-approval done early also lets your lender flag any debt-to-income issues before you’re under contract and racing a clock.
Write the Right Contingencies Into Your Offer
Your purchase offer on the new home should include a home sale contingency, an addendum stating that the deal depends on your current property selling by a certain date, usually 30 to 60 days. The addendum identifies your current home’s address and listing price so the seller can judge how realistic the sale is. If your home doesn’t go under contract by the deadline, you can walk away and get your earnest money back.
A separate protection is the settlement contingency, which ties the new purchase to the actual closing of your current home rather than just getting it under contract. The difference matters. You might find a buyer for your current place but face a closing delay. The settlement contingency lets you back out if your sale falls apart at the last minute, rather than being locked into buying a home you can no longer afford.
Kick-Out Clauses
Sellers aren’t always thrilled about contingent offers, so expect the seller to insist on a kick-out clause. This lets the seller keep marketing the home and accept backup offers. If a better one comes in, the seller notifies you in writing, and you typically have 72 hours to either remove your home sale contingency and commit to buying regardless, or step aside and let the backup buyer take over. That window is tight, so have a realistic plan for what you’d do before you agree to it.
Your earnest money deposit, held in escrow until closing, shows the seller you’re serious. If you cancel under a valid contingency, the deposit comes back. If you waive contingencies and then can’t close, you risk forfeiting it. The purchase agreement should spell out exactly which contingencies protect your deposit and under what conditions.
Bridge the Gap When the Timing Doesn’t Line Up
When closings won’t sync, three options commonly cover the gap.
Bridge Loans
A bridge loan is short-term financing that lets you tap the equity in your current home for a down payment on the next one, repaid within a few months once your current home sells. Lenders evaluate your debt-to-income ratio across both properties and typically cap the loan at 65% to 80% of the combined property value, with higher ratios carrying steeper interest rates and stricter qualification requirements. Bridge loan interest rates run noticeably higher than conventional mortgage rates, and most lenders charge an origination fee of 1% to 2% of the loan amount. The tradeoff is speed: bridge loans close fast.
HELOCs
A HELOC on your current home can also provide down payment funds, but the timing needs planning. You need to apply for and open the HELOC well before you list. Once your property hits the market, most lenders won’t approve a new HELOC on it, and at closing the title company will require the line to be frozen so you can’t draw additional funds between settlement and payoff. The application involves a credit check and an appraisal.
There’s another timing wrinkle. Federal law gives you a three-business-day right to cancel after signing the credit agreement, and the lender cannot release any funds until that rescission period expires.2Consumer Financial Protection Bureau. Regulation Z Section 1026.23 – Right of Rescission For rescission purposes, business days include Saturdays but not Sundays or federal holidays.3Consumer Financial Protection Bureau. How Long Do I Have to Rescind? When Does the Right of Rescission Start? Build that delay into your timeline if you’re counting on HELOC funds for your down payment.
401(k) Loans
If your employer’s retirement plan allows loans, you can borrow up to $50,000 or half your vested balance, whichever is less, to help fund a home purchase.4Internal Revenue Service. Retirement Topics – Plan Loans Most 401(k) loans must be repaid within five years, but loans used to buy a primary residence can qualify for a longer repayment period under your plan’s terms.5Internal Revenue Service. Retirement Plans FAQs Regarding Loans Repayment usually runs through automatic payroll deductions. The risk is real: if you leave your job before the loan is repaid, the outstanding balance may be treated as a taxable distribution, and you could owe income tax plus a 10% early withdrawal penalty if you’re under 59½.
Rent Back From Your Buyer
A post-settlement occupancy agreement, sometimes called a rent-back, lets you stay in your current home for a short period after it sells. It’s one of the most practical tools for bridging the gap between closings because it removes the need for temporary housing or storage. These agreements generally cap the stay at 60 days or less. A longer occupancy can affect the buyer’s mortgage terms and insurance coverage, so buyers push back on anything longer.
The daily or monthly rate is typically pegged to the new buyer’s carrying costs: their mortgage principal, interest, property taxes, and insurance divided by the number of days. That way the buyer isn’t subsidizing your extended stay. A security deposit in escrow covers potential damage, and the agreement should spell out a hard move-out date with penalties for overstaying. Nail down the exact terms before closing rather than relying on verbal agreements, because once the sale records, the buyer owns the property.
Sequence the Two Closings
In a simultaneous transaction, the closing on your current home happens first, and the net proceeds from that sale fund your purchase closing, ideally the same day or within a day or two. The settlement agent wires your sale proceeds to the escrow account for the second transaction, and the title company handling your purchase waits for electronic confirmation that the funds have arrived before disbursing. This is where the operation can stall. Wire transfers between financial institutions typically clear within hours on business days, but delays happen, especially with wires initiated late in the afternoon or flagged by compliance review.
One variable that catches people off guard is whether your jurisdiction uses wet or dry funding. In wet-funding states, the lender disburses loan funds at the closing table on the same day documents are signed. In dry-funding states, the lender reviews all signed documents before releasing funds, adding a day or more between signing and disbursement. If your purchase is in a dry-funding state, a same-day close on both properties may not be possible, so build in a cushion.
Once both closings fund, the title company records the new deeds and any mortgage liens with the local registrar’s office. Recording fees vary by jurisdiction, typically charged as a flat fee or per-page rate. Electronic filing in many areas allows near-immediate recording. After recording, review your final Closing Disclosure for each transaction to confirm all fees, credits, and prorations were applied correctly.6Consumer Financial Protection Bureau. Closing Disclosure Explainer Errors in proration of property taxes or HOA dues between buyer and seller are common and much easier to fix in the first few weeks than months later.
Insurance and Taxes During the Switch
If you own both homes simultaneously for any stretch, even a few days, you need active homeowners insurance on each property. Your new policy should take effect on the closing date of your purchase so coverage is in place the moment you take title. Cancel your old policy only after your sale has formally closed and ownership has transferred. Canceling early creates a gap where you’re uninsured on a home you still legally own, which also violates most mortgage agreements. If you’re staying in your old home under a rent-back, coordinate with the new owner’s insurer; you may need a short-term renter’s policy for your belongings and liability, since the buyer’s homeowners policy won’t cover your possessions.
When you sell your current home at a profit, federal tax law lets you exclude up to $250,000 of that gain from income if you’re a single filer, or up to $500,000 if you’re married filing jointly. To qualify, you need to have owned and used the home as your primary residence for at least two of the five years before the sale.7Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence For most people selling a primary residence to buy another, the entire gain falls within the exclusion and no federal tax is owed.
If your gain exceeds the exclusion, the overage is taxed as a capital gain. Married couples filing jointly both need to meet the two-year use requirement, though only one spouse needs to satisfy the ownership requirement.7Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence You also can’t have claimed this exclusion on another home sale within the two years before the current sale. Keep your purchase records, receipts for major improvements, and the Closing Disclosure from your original purchase; these establish your cost basis and reduce your taxable gain if you’re near the exclusion ceiling. The closing agent will typically file a Form 1099-S reporting gross proceeds to the IRS whenever those proceeds reach $600 or more, so the sale appears on the IRS’s records even when the exclusion wipes out your tax liability.8Internal Revenue Service. General Instructions for Certain Information Returns – 2026