Timing your move into a new Minnetonka home without juggling two moves or two mortgages can feel stressful. You want a smooth handoff from your current house to the next one, without losing out on the right property. The good news is you have several proven financing paths that local buyers use to buy first and sell next. In this guide, you will learn the options, how lenders view them, and how to choose the right fit for your goals. Let’s dive in.
What buying first looks like locally
In Minnetonka and the western suburbs, many buyers choose to write stronger, non-contingent offers so they can secure the right home. That usually means arranging short-term funds for your down payment or purchase, then paying that financing off once your current home sells. Local lenders often offer portfolio solutions and will want to see your complete plan to sell, including timing and marketability.
Your timeline matters. Underwriting for bridge or second-lien products can add a few days, and appraisals can affect timing. Strong coordination with your lender, title team, and listing agent helps you avoid occupancy and funding conflicts.
Four smart financing paths
Bridge loan
A bridge loan is a short-term loan that covers your purchase until your current home sells. It is usually secured by your existing home, lasts 6 to 12 months, and often has interest-only payments. Lenders look at combined loan-to-value and your ability to carry both payments if your sale is delayed.
When it fits:
- You want a non-contingent offer and have solid equity in your current home.
- You plan to list quickly and expect an efficient sale.
What to expect:
- Underwriting typically takes 2 to 4 weeks with full documentation and an appraisal on the collateral property.
- Rates and fees are higher than a standard first mortgage.
Pros and cons:
- Pros: stronger offers, faster closings than sale-dependent financing.
- Cons: higher costs and the risk of carrying two payments for a short time.
Helpful resource: For general mortgage concepts and consumer protections, review the Consumer Financial Protection Bureau’s guidance on home loans at the CFPB.
HELOC or home equity loan
A home equity line of credit (HELOC) or a fixed home equity loan lets you tap equity in your current home for your down payment. HELOCs have variable rates and flexible draws. Equity loans have fixed rates and fixed payments. Lenders qualify you using combined loan-to-value and will decide how they treat the HELOC payment in your debt-to-income.
When it fits:
- You have strong equity and want a potentially lower-cost option than a bridge loan.
- You are comfortable with a variable rate if you choose a HELOC.
What to expect:
- Opening a HELOC can take 2 to 6 weeks, depending on whether an appraisal is required.
- Some lenders allow immediate draws for purchase funds while others require seasoning.
Pros and cons:
- Pros: flexible, often lower cost than a bridge loan.
- Cons: variable rates can rise and the line counts in your qualifying.
Tax note: HELOC interest is generally deductible only when funds are used to buy, build, or substantially improve the home that secures the line. Review the rules with your tax advisor and the IRS guidance.
For plain-language overviews of HELOCs and bridge loans, you can also read consumer explainers from Bankrate.
Recast after a large payment
A recast lets you make a large principal payment and have your lender re-amortize your loan so your payment drops while your original rate and term stay the same. Many conventional loans permit recasts, but not all lenders or loan types do.
How it works in a buy-first plan:
- Close on your new home using a bridge or HELOC for your down payment.
- After your sale closes, pay down the new mortgage balance and request a recast.
What to expect:
- Lenders charge a modest one-time fee and process recasts in a few weeks.
- The interest rate does not change. The monthly payment falls because the balance is lower.
Helpful resource: Conventional loan rules are influenced by Fannie Mae and Freddie Mac guidelines, though lenders set their own recast policies. Ask your lender about availability and fees early.
Seller rent-back (post-closing occupancy)
A rent-back lets a seller remain in the home for a short, agreed period after closing. It is a written agreement that sets move-out date, daily rent, security deposit, utilities, insurance, and condition at move-out. Your lender must approve the arrangement, and Minnesota landlord-tenant laws apply once the seller becomes a tenant.
When it fits:
- You want to avoid a double move and the seller needs a few weeks to vacate.
- Your lender allows short-term occupancy after closing.
What to expect:
- Typical periods are 1 to 30 days. Longer periods can trigger more lender and insurance scrutiny.
- Include penalties for late vacating and an escrow holdback if you want added protection.
Legal note: Minnesota landlord-tenant rules, including security deposits and possession timelines, are in Minn. Stat. ch. 504B. Confirm details with your lender and a Minnesota real estate attorney for longer rent-back periods.
How lenders qualify you in practice
Lenders focus on three items: equity, income, and reserves. Combined loan-to-value typically needs to stay under common caps for the product type. Debt-to-income must work even if your current mortgage is still in place. Many lenders ask for 2 to 6 months of reserves to cover payments across both properties.
Expect appraisals on the collateral property and on your purchase. In a competitive market, plan for possible appraisal gaps. Early, complete documentation helps your lender move faster and issue a strong approval rather than a basic pre-qualification.
Local lender landscape: Regional banks, credit unions, and mortgage brokers in the western suburbs often offer portfolio bridge or second-lien options. If you want to understand licensing and consumer protections for mortgage companies in Minnesota, visit the Minnesota Department of Commerce.
Market data matters. Your pricing strategy for the home you are selling influences your risk and your financing path. For market trends and industry updates, see Minnesota REALTORS, and confirm current conditions with your agent.
Timeline and logistics you can expect
- Weeks 0 to 1: Align on strategy with your lender and agent. Gather documents and map your exit plan for selling.
- Weeks 1 to 3: If using a HELOC or bridge, apply and complete underwriting. Order valuation if required.
- Weeks 2 to 4: Shop and write offers. Your lender issues updated approvals based on the financing path.
- Weeks 4 to 6: Purchase loan underwriting and appraisal. Title coordinates closing logistics and any payoffs.
- Closing day: If using a rent-back, the signed occupancy agreement is in the closing package. Insurance and utilities are set per the agreement.
- After your sale: Title coordinates payoff of the bridge or HELOC. If you plan to recast, submit your lump-sum payment and recast request per your servicer’s process.
Risks and how to reduce them
Common risks:
- Carrying two mortgage payments if your sale is delayed.
- Higher interest costs on short-term loans or variable HELOC rates.
- Appraisal shortfalls or unexpected repairs that affect net proceeds.
- Rent-back occupants who overstay or cause damage.
- Product restrictions that limit your options.
Practical mitigations:
- Keep cash reserves to cover several months of payments.
- Use conservative sale price and net-proceeds estimates.
- Pre-plan a price reduction strategy and enhanced marketing if your listing lags.
- Get written rent-back terms with clear move-out penalties and escrow holdbacks.
- Ask your lender for written payoff steps and timing to avoid funding gaps at closing.
If you want a neutral second look at your plan, HUD-approved housing counselors can be a helpful resource. Explore programs at HUD.
Hypothetical examples
These examples are for illustration only. Your numbers will vary.
Hypothetical A: HELOC for down payment
You are buying a 750,000 home and still own a 450,000 home. You open a HELOC on your current home to fund the down payment. Your lender caps combined loan-to-value at 85 percent and asks for three months of reserves. You plan to pay off the HELOC from sale proceeds and then request a recast of your new mortgage.
Hypothetical B: Bridge loan to avoid a contingency
You have roughly 30 percent equity in your current home. You use a nine-month bridge loan secured by that home so you can buy a 1,000,000 property without a sale contingency. The bridge loan has a higher rate and interest-only payments. You list immediately after closing and the title company coordinates the bridge payoff at your sale closing.
Hypothetical C: Rent-back for a smooth move
You win a home where the seller needs 21 days after closing to move. You sign a written rent-back addendum that sets daily rent, a security deposit, utilities, insurance, and a firm vacate date. Your lender reviews and approves the terms before funding. You move in on schedule and avoid a double move.
What to ask your lender and agent
Bring these items to your first planning call:
- Current mortgage statements, balance, rate, and payment.
- Estimated value of your home and target proceeds.
- Down payment target for the new purchase.
- Your desired move-in date and how long you can carry two homes.
- Preferred loan type for your purchase (conventional, FHA, VA).
Key questions for your lender:
- Do you offer bridge loans or a purchase-money second? What are the typical terms and fees?
- How do you count a newly opened HELOC in debt-to-income and reserves?
- Will you allow a short-term seller rent-back and what documentation is needed?
- Do you allow mortgage recasts on the loan I plan to use? What is the fee and timeline?
Key questions for your agent:
- What is the pricing and marketing plan for my sale, and what is the backup plan if we need more showings?
- How will we coordinate title, insurance, and occupancy if we use a rent-back?
- What appraisal and inspection risks should we plan for in this price range?
Ready to map your path
You deserve a smooth, confident move into your next Minnetonka home. If you want a clear plan and introductions to local lenders, title partners, and advisors who work these strategies every week, let’s talk. Schedule a complimentary consultation with Kristi Weinstock to walk through your numbers and timeline.
FAQs
What is a bridge loan for Minnetonka buyers?
- A bridge loan is a short-term loan, usually 6 to 12 months, that lets you buy before you sell by using your current home as collateral and paying it off after your sale.
Can I use a HELOC for my down payment on a new home?
- Yes, many buyers draw on a HELOC for the down payment, but lenders count the line in qualifying and some require seasoning; confirm terms and tax treatment with your lender and the IRS guidance.
How does a mortgage recast work after I sell?
- You make a large principal payment on your new loan, then your lender re-amortizes so the monthly payment drops while the rate stays the same; not all loans allow recasts, so ask early.
How do rent-back agreements work in Minnesota?
- A rent-back is a written agreement where the seller stays as a short-term tenant after closing; Minnesota landlord-tenant rules in Minn. Stat. ch. 504B apply and your lender must approve.
What do lenders look for when I buy before I sell?
- Lenders evaluate combined loan-to-value, debt-to-income including overlapping payments, cash reserves, and appraisals, and they will want a clear plan for how and when your current home will be sold.
