How to buy a home when you already own one

Money Girl

This episode addresses listener Emily S.'s dilemma about purchasing a new home while still owning her current property. Host Laura Adams breaks down four primary strategies for funding the

Key takeaways

• Over 50% of repeat homebuyers fund their down payment using equity from the sale of their previous home, according to the National Association of Realtors.
• Carrying two mortgages simultaneously increases a borrower's debt-to-income (DTI) ratio, which lenders strictly evaluate during underwriting.

Main topics

• Down payment funding strategies
• Debt-to-income ratio underwriting standards

Notable quotes

"Over 50% of repeat homebuyers fund their down payment with the equity from selling their previous home."

Conclusion

The episode provides actionable financial frameworks for navigating overlapping property

Transcript preview

Speaker 1 (0:04) Here's a dilemma most homeowners eventually face. Should I buy a new home before selling the one I already own? Or is it safer to sell my current home first? I just received a great multi-layered question from Emily S., who needs advice on her next move. Emily says, Hi, Laura. Can you discuss the process of buying a home when you already own a home? I'm wondering how my current mortgage plays into getting a new mortgage. Also, does my down payment need to come from savings or could it come from sale proceeds or even a HELOC? I'm also considering keeping my current home to rent out. So how would that change things? The process seems dependent on many factors that have to be timed perfectly. And I'm hoping you can explain where to start. Thank you. Thanks so much, Emily. You're definitely asking the right questions. And these are the exact questions that keep many homeowners up at night when they're ready to move. I think knowing whether to sell your current home or to buy another one first often feels like a financial puzzle with so many unknowns. So, you know, it's not unusual to feel a little perplexed about the whole process. So if you're like Emily and you've ever worried about getting stuck paying two mortgages, not finding your next home fast enough, or whether you should turn your home into a rental, this episode is for you. I'll review tips for timing your home sale, sourcing a down payment, and whether becoming a landlord is wise. Hey, everyone, welcome back. This is episode 1056 of Money Girl. I'm Laura Adams, an award-winning author, media spokesperson, and money speaker, and of course, host of this show with over 44 million downloads. I'm booking events for next year, whether you're looking for a speaking event that's remote or in person. I hope you'll reach out and contact me if you need a keynote speaker or a presenter for your company or organization. I'd love to talk with you about it. it. In the show notes, you can find links to learn more about me, submit your money question, and sign up for my free newsletter, The Money Stack. All right, so let's break down where Emily's down payment can come from. And I'll start with four ways that you can finance a new home, especially when you have a significant amount of money. tied up in your current home. So the right option really depends on your savings, risk tolerance, and what's happening in the housing markets where you live now and maybe where you want to live. So option number one is to use cash savings. So this first option is definitely the most straightforward. You would use your savings. If you have enough cash for a down payment, your offer won't be contingent on selling your old home. And that's something that sellers always love to see. However, mortgage lenders do require you to have a healthy cash reserve, especially if you'll be carrying two home loans for a period. In other words, You can't drain your savings account entirely to make a down payment. So keep that in mind, you know, when you're thinking about using your cash. The second option is the most common way to buy a home, and that is using your existing home equity. According to the National Association of Realtors, over 50 % of repeat homebuyers fund their down payment with the equity from selling their previous home. And I think most homebuyers just don't have hundreds of thousands of dollars sitting in a liquid savings account for a down payment. And if you're like most homeowners, a lot of your wealth is tied up in