Real Estate Blog


    Financing as a move-up buyer

    When purchasing a home as a move-up buyer, your financing options can be a bit more complicated. For many move-up buyers, coming up with the funds for a down payment is a difficult task without selling their current home first. As you’re juggling selling and buying a new home at the same time, you need to weigh your financing options.

    Here are 3 financing options as a move-up buyer:

    1. Make your purchase offer contingent on the sale of your home

    One way to ensure that you have the funds available for your next home is to make your purchase offers contingent on the sale of your current home. This will ensure that you aren’t paying double mortgages for an extended period of time. It will also allow you to free up the funds for your down payment and closing costs once your current home sells. This is however a bit tricky to get a seller to agree to, especially in a seller’s market where they may have multiple offers.

    2. Take out a home equity line of credit for your down payment

    Another option when financing for a new home as a move-up buyer is to take out a home equity line of credit for your down payment. A home equity line of credit takes into account the equity you have wrapped up in your current home. How it works is the bank will calculate the equity you have built by subtracting the mortgage loan amount that's left from the home's value. This will then allow you to use your current home’s equity as a down payment prior to actually selling your home.

    3. Opt for an FHA Loan with a smaller down payment

    A third option when financing as a move-up buyer is to opt for an FHA loan. There is a common misconception that FHA loans are only in place for first time home buyers, but that is not the case. Even as a second time home buyer you can qualify for an FHA loan. An FHA loan requires a minimum down payment of 3.5%. As a second time home buyer this can free up other funds to allow you to be more flexible with your next home purchase. Keep in mind though that by opting for an FHA loan you’ll be required to pay mortgage insurance.

    Although financing as a move-up buyer is not always straightforward, there are a wide variety of options that you can choose from to finance your new home. By choosing one of these 3 financing options you can ensure that you have room in your budget for the down payment you need while you work to sell your current home. Wondering what the best financing option is for you? Work with a qualified realtor and mortgage lender to weigh your options as a move-up buyer.

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