How to buy a house before selling yours, without a lease or a bridge loan

When you still own your current home, a lender counts its full monthly payment against you. Add the new mortgage and your debt to income ratio can blow past the limit, even if you plan to sell in sixty days. The usual workarounds each have a catch:

• A sale contingency makes your offer weaker, and in a busy Maine or Florida market sellers often pass on it.
• A bridge loan works, but it is a second loan with its own costs. I cover it on my Maine bridge loans and Florida bridge loans pages.
• Signing a lease on the old house so the rent counts means finding a tenant you may not want, right when you are trying to sell.

1. The appraiser completes a rent schedule on your current home showing what it would rent for.
2. 80% of that market rent is used as income against that home's full payment.
3. If 80% of the rent covers the payment, the old house stops counting against you. If it covers part of it, only the gap counts.
4. You qualify for the new home with that lower debt load, and you keep listing the old house for sale.

No lease, no tenant, and no requirement to actually rent it out. You are simply showing that the house could carry itself if it had to.

Say your current home's full payment is $2,000 a month and the appraiser sets market rent at $2,500. 80% of $2,500 is $2,000, which offsets the full payment. On paper, the old house no longer adds to your debt, and your income is measured against the new home's payment alone. Your real numbers depend on your file and the program.

• Move up buyers in Portland, Scarborough or Bangor who found the next house before listing.
• Maine to Florida movers who want the Florida home lined up before the Maine house closes. My Maine to Florida relocation page covers the timing.
• Downsizers and retirees buying a smaller place first so they only move once.
• Florida homeowners moving within the state who don't want a contingent offer.

Credit, assets for the down payment and closing costs, reserves, and the new home itself. You still need the down payment from savings or another source unless your equity is unlocked separately. If you need the old home's equity for the new down payment, a bridge loan or a HELOC may fit better, and I compare both on bridge loan vs HELOC.

If you are buying in Florida, homestead and tax timing matter too. I explain them in buying a house before selling in Florida: homestead and tax timing.