Buy a Home Before you Sell your Current Home in CA

Buy a Home Before you Sell your Current Home in CA

Arbor Financial Group
Arbor Financial Group
Published on April 6, 2023
Buy a Home Before you sell your current home

Buy a Home Before you Sell your Current Home in CA

Buying a home in California when you already own one is challenging for most homeowners. There are a lot of questions that come up. How do you buy a home before you sell your current home? What will the payment be for the new home? How do we qualify for a mortgage on the new home if we haven’t sold our current home? Can we use the equity in our current home as a down payment for the new home? These are just a few concerns that can prevent homeowners from moving into their dream home.  Our Buy Before You Sell program helps take the worry out of buying and selling simultaneously. We can equip homeowners with a down payment loan for their new home, allowing them to access their current home equity without delay - and no more dealing with two mortgages!

Buy a Home Before You Sell Your Current Home

While some homeowners may be able to buy a home before selling their current home, most homeowners do not have the financial strength to qualify for two mortgages at the same time, let along come up with a down payment for the new purchase. The Buy Before You Sell program solves both problems.

Buy  – Move  –  Sell

  • No Home Sale Contingency
  • Loan Payoff Value -offsetting liability with a Guaranteed Offer to purchase.
  • Equity Unlock – Tap into your current home’s equity for a down payment loan, minor repairs/upgrades, and mortgage payment coverage.

Contingency Buster – the Guaranteed Offer

Unlock the path to your new home with a Guaranteed Offer that will offset any mortgage liabilities from the real estate contract, allowing you to move forward without remaining contingent on the sale of your home. The Buy Before You Sell program issues a Guaranteed offer to purchase your home. It’s important to understand that this Guaranteed Offer should be considered a “back up” offer. The homeowner still has full control the sell their home for full market price.  This Guaranteed Offer not only gives you the confidence to make an offer on another home without including a home sale contingency (since your home is now guaranteed to be sold), but it also eliminates the current mortgage payment as a debt when qualifying for the new mortgage. This is because Fannie Mae and Freddie Mac allow the current payment to be ignored when the home is guaranteed to be sold within 90 days of closing the new home.

Equity Unlock

The Buy Before You Sell program includes getting a 0% interest “equity bridge loan” for the down payment on the new home. The loan can also be used to make repairs to the Departing Residence.

buy a home before you sell your current home

How does the Buy Before you sell program work?

STEP 1: Get your current property and financing approved. This includes:

  • Loan Payoff Value – a payoff statement will be retrieved to determine the total owed on the Departing Residence.
  • Current equity for the down payment – calculations will be completed to determine how much equity is available for the Bridge loan. The potential sale value will be reviewed. Your real estate agent will provide a Broker’s Price Opinion (BPO) to help determine the estimated sales price.
  • Mortgage Payment Coverage – The loan from the Buy Before You Sell program can even the used to cover payment in the departing residence until the home is sold.

STEP 2: Make a strong offer on your new home

  • You can now make an offer on your dream home with No Home Sale Contingency.

STEP 3: Move in on your schedule

  • You can move into your new home immediately after closing.

STEP 4: Get full market value when you sell your home

  • 90 days to go under contract on the open market after closing your purchase. That’s right. The Guaranteed Offer on your home is there as a safety net. You still have full control over the sale of your home. Now that you have moved out, you’re home can be painted, upgraded, staged, and whatever else needs to be done to get the highest price from the sale. Your home must be listed within ten days of the closing on your purchase.

Use funds from departing residence for down payment on next home

Buy Before You Sell Requirements

The Home

  • Home Value between $250,000 and $2,500,000
  • 750+ Square feet
  • At least 1 bedroom + 1 Bath
  • Solar financing must be paid in full
  • Solar lease does not need to be paid in full but will be accounted for in the payoff calculation.
  • No VA or FHA financing on the new property purchase. This is primarily for buyers using Fannie Mae/Freddie Mac financing on the purchase.
  • Both properties need to be the homeowner’s Primary Residence.

The Lot & Location

  • CA, CO, AZ, OR, WA, FL GA
  • Eligible properties: single-family home, townhome, or condo
  • Less than 2 acres
  • Must have access to public roads and utilities
  • Must be zoned as residential
  • Not in an age-restricted community
  • Not a short sale or pre-foreclosure
  • Not subject to any leases, including tenancy, oil/gas/mineral rights
  • The Departing Residence cannot be part of an active construction community

Repairs & Renovations

  • No ongoing renovations affecting the bathroom, kitchen, drywall, or landscaping
  • No major defects in or ongoing repairs or upgrades to the foundation, framing, roof, plumbing, electrical, HVAC, and chimney

Listing & Days on the Market

  • The Property must be less than 100 days on the market at the time of submission to the program.
  • Property must be approved before 115 days on the market.
  • Expected days on the market must be less than 90 days “list to pending.”

Cost to Participate in the Buy Before You Program

The cost to use the Buy Before You Sell program is 2.4% of the sales price of the Departing Residence. If your Departing Residence sells for $800,000, the program costs $19,200. When homeowners determine whether they will benefit from this program, they need to weigh the alternatives. In our $800,000 example, will the home seller compensate for the program cost by having time to clean up and stage their property? They won’t be rushed to sell their home at potentially a steep discount so that they can buy their dream home. Can an offer be accepted on their dream home if it includes a home sale contingency?  Every market is different. Every situation is different. For some move-up buyers, this program will answer their problems. But for some, it may not.

How is the Equity Loan amount determined?

The amount allowed for the Equity Loan will be based on the equity remaining in the property after backing out the current mortgage payoff from the Guaranteed Offer price. The Guaranteed Offer Price is typically 15% to 20% below the current market value. The calculation for the Guaranteed Offer can be different from one property to the next. Assuming your home has a true market value of $800,000, the Guaranteed Offer price may be in the $640,000 to $680,000 range. (A move-in ready home in a hot market with a great location has a better chance of getting a $680,000 offer, whereas a market with increasing inventory, poor location, etc may be closer to a $640,000 Guaranteed Offer.) If the homeowner receives a Guaranteed Offer for $680,000 and owes $300,000 on their home, then the 0% interest equity line available for the down payment (and/or repairs on the current home) will be in the $380,000 range.

If they use the full $380,000 and then sell their home for $800,000, they will still end up with additional funds from the sale after the typical selling costs (sales commissions, escrow, title, etc).

PreApproval for the Purchase

As part of this program, the Move up Buyer must get a fully underwritten PreApproval. A PreApproval is a step all buyers should take when purchasing a home, but a fully underwritten PreApproval goes a step further. With a fully underwritten PreApproval, the Move-Up Buyer can confidently make an offer on their dream home and not only waive the home sale contingency but also the loan contingency. This makes their offer stronger than most competing offers.

Contact me today to see what your numbers look like for the Buy Before You Sell program. My team will prepare a full Purchase Analysis showing a full breakdown of the numbers.

Authored by Tim Storm, an Orange County Loan Officer and Mortgage Advisor for Arbor Financial Group (NMLS ID 236669). MLO 223456. – Please contact me at 949-829-1846.  I will prepare a custom Total Cost Analysis which will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you can fully understand the numbers BEFORE starting the loan process.

Arbor Financial Group
Arbor Financial Group Santa Ana
Click to Call or Text:
(949) 829-1846

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