How to Buy and Sell a House at the Same Time

Selling your house and buying another home at the same time is the ultimate feat in multitasking, and it comes with a tricky timing challenge.

If you have a mortgage on your current home and you buy a house before selling, you could get stuck with loan payments and the cost of upkeep on both properties. If you sell your house before buying, you might have nowhere to go after the sale closes.

But with planning, the right financing and strategic pricing and negotiating, you can time the sale and the new purchase in a way that works for you.

Here are some strategies to make it come together.

Laying the groundwork for buying and selling

There's lots of prep work for buying and selling, so start getting ready for both as soon as you can.

"The more you plan, the more it will save you from making big mistakes," says Brian G. Smith, vice president of national business development at Union Home Mortgage in Ohio.

Get ready to sell

A good listing agent can provide guidance on how to prepare your home for the market.

That will include making any necessary repairs to remove red flags for buyers, as well as decluttering and cleaning, says Joey Sheehan, an agent with Berkshire Hathaway HomeServices Fox & Roach, Realtors in Bryn Mawr, Pennsylvania.

"Almost every house is too cluttered from the point of view of selling because selling a home is an entirely different activity from living in it," Sheehan says.

After cleaning and decluttering, get photographs and videos of the home completed so those materials are set to go when you're ready to list the property, recommends Christian Ross, managing broker for Engel & Volkers in Atlanta.

» MORE: 7 home staging ideas to get your house ready to sell

Get ready to buy

"Number one is to make sure your finances are in order. A lot of people say, 'Oh, I know, I have great credit. I know I can get approved,'" Ross says. "But lending guidelines are changing every day."

To get an offer accepted in today's hot housing market, you'll either need to have cash to buy it outright or be fully preapproved for a mortgage to finance the home, without any conditions from a lender that your existing home must sell first.

"The preapproval process for all borrowers should really start before they jump in and begin house hunting," says Brian Blonder, senior vice president for mortgage sales at Capital Bank in Maryland.

How to make the money work

When selling your home, you likely will use the proceeds to pay off the mortgage and then apply any remaining money toward the next property.

But until that sale closes, you'll need to come up with money for a down payment and have financing set up to buy the next home.

Some homeowners tap into savings accounts for the down payment on the next house. But not everyone has a hefty enough balance to make that work. Here are some other options.

Home equity line of credit

You could use a home equity line of credit, or HELOC, on your current home to draw cash for the down payment. But you'll need to have the HELOC already in place; a lender won't approve the credit line after you've put your house on the market, Blonder says.

Don't wait until the last minute to apply if you think you might use a HELOC someday to finance the next purchase. Smith says sometimes a line of credit can take longer for approval than a first mortgage.

Bridge loan

With a bridge loan you can borrow up to 80% of your home's value to pay off the old mortgage and put any remaining money toward a down payment on another home. Or you can use a bridge loan as a second mortgage to borrow a portion of your home equity for a down payment.

You make interest-only payments on the loan, and the maximum term is typically a year. But usually, bridge loans are paid off much more quickly because they're designed to fill that short gap between the old-house sale and new-house purchase.

Because the term is short, interest rates are a couple of percentage points higher on a bridge loan than for a regular mortgage.

Some applicants who get approved for bridge loans don't even need to use them because the sale ends up closing before the purchase after all.