Buying your next Los Altos home before selling your current one can feel like a high‑wire act. You want the right house, the right timing, and the flexibility to write a strong offer without uprooting your family twice. In this guide, you’ll learn the financing paths that make buy‑before‑you‑sell possible in Los Altos, how lenders view two mortgages, and the practical steps to reduce risk and stress. Let’s dive in.
Why buy before you sell in Los Altos
Los Altos is a high‑price, low‑inventory market. Many homes attract strong interest, and sellers often prefer clean offers that do not depend on the sale of another property. Buying first can help you secure the right location and avoid temporary housing or multiple moves.
The trade‑offs are real. You may carry two sets of housing costs for a time and face more complex underwriting. Planning your exit strategy up front keeps the process efficient and helps you avoid a longer overlap than needed.
What lenders look for if you own two homes
When you apply for a new mortgage while keeping your current home, lenders usually include your existing mortgage payment in your debt‑to‑income ratio unless it will be paid off at closing. Expect a careful review of income, assets, and reserves, especially for higher‑value loans common in Los Altos.
Jumbo financing is often required here because many prices exceed conforming loan limits. Review current limits and product guidance on Freddie Mac’s loan limits page to understand why a jumbo loan may apply.
Financing options that work in Los Altos
Bridge loan
A bridge loan is a short‑term, interest‑only loan that uses your current home’s equity to fund a down payment or help you close before selling. It fits when you need speed and flexibility to write a non‑contingent offer. The trade‑off is higher rates and fees, plus a short term of roughly 6 to 12 months with renewal risk.
What to know: Not all lenders offer bridge loans. Approval improves with a solid exit plan and documented equity. Budget for appraisal and origination fees.
HELOC on your current home
A home equity line of credit lets you draw funds as needed for a down payment or reserves. It can be more cost‑effective than a bridge loan if you have strong equity and qualify quickly. The main risk is a variable rate that can rise over time.
What to know: Lenders look at combined loan‑to‑value and may require you to retain 20 to 30 percent equity. A HELOC can also reduce flexibility for future cash‑out options.
Home equity loan
A home equity loan provides a fixed‑rate, lump‑sum amount secured by your current home. Payments are predictable, which some buyers prefer for budgeting. The added monthly payment will factor into your debt‑to‑income ratio until your sale closes.
What to know: Underwriting and appraisal still apply. This can be a fit if you prefer fixed costs and have time to close before shopping.
Cash‑out refinance
With a cash‑out refinance, you replace your existing mortgage with a larger one and use the difference toward your purchase. You end up with a single loan and a stable payment on your current home while you shop.
What to know: Refinances take time, involve closing costs, and may raise your rate if market rates increased since you got your current loan. Ask your lender about seasoning and loan‑to‑value limits.
Jumbo mortgage for the new home
Many Los Altos buyers finance the new purchase with a jumbo loan and keep their current mortgage until it sells. This helps you close without a sale contingency and can be paired with cash from savings or a smaller equity line for the down payment.
What to know: Jumbo loans require stronger credit, larger reserves, and often bigger down payments. Underwriting is detailed, so start early.
Portfolio or relationship lending
Some banks keep certain loans on their books and can underwrite more flexibly. If you have a strong banking relationship, this path can help you navigate complex income or asset structures and timing needs.
What to know: Criteria and pricing vary by bank. Relationship history can improve terms, but expect careful documentation.
Seller‑assisted timing solutions
A seller rent‑back lets the seller remain in the home after closing for a short period while you prepare to move in. This can smooth logistics if you are selling your current home soon after your purchase. Owner financing is rare in Los Altos but can appear when liquidity or loan packaging is an issue.
What to know: These strategies require clear contracts and timelines. Your agent will structure terms to protect all parties.
Contingent or backup offers
Sale‑contingent offers are less competitive in low‑inventory markets like Los Altos. A backup offer can keep you in position if the primary contract falls through.
What to know: These options can reduce financing costs but lower acceptance odds in multiple‑offer situations.
Private or hard‑money financing
Private loans can close quickly but usually carry high rates and fees. For primary residences, they are a last resort due to cost and short terms.
What to know: If you consider this path, use it only as a short bridge with a clear exit plan.
Timing, escrow, and move‑in logistics
California escrow timelines and contingencies vary by deal. In a buy‑before‑you‑sell scenario, you and your lender should map a precise calendar that aligns your purchase, your listing launch, and expected closing dates. Overlapping escrows and short rent‑backs can reduce the chance of storing furniture or arranging temporary housing.
Have documents ready for lenders and buyers early. A signed listing agreement, pricing strategy, and marketing plan signal a credible exit, which strengthens underwriting and gives you more confidence in your timeline.
Taxes and carrying costs to plan for
If you are selling a primary residence, you may qualify for the Section 121 capital gains exclusion, subject to ownership and use tests. Review the IRS’s guidance in Publication 523, Selling Your Home and speak with your tax advisor about your specific situation.
While you own both properties, budget for two insurance policies, property taxes, HOA dues if applicable, utilities, and maintenance. Add a cushion for overlap months in case the market takes longer than expected to deliver the right offer.
A simple decision framework
Use this quick guide to narrow your approach:
- If you have strong equity and want flexibility: Consider a HELOC or a cash‑out refinance.
- If you need to move fast for a specific home: A bridge loan can provide short‑term funds to write a non‑contingent offer.
- If your target price is well above conforming limits: Prepare for jumbo underwriting and larger reserve requirements.
- If your financial profile is complex or asset‑heavy: Explore portfolio or relationship lending with your primary bank.
- If timing is your main constraint: Pair your financing with a tightly structured rent‑back or overlapping escrows.
Los Altos buy‑before‑you‑sell checklist
Pre‑decision
- Get pre‑approved for your permanent purchase loan and discuss carrying two mortgages with your lender.
- Ask a local lender or broker about jumbo and bridge products common in Silicon Valley.
- Estimate your current home’s equity with recent comps or a broker price opinion.
- Review reserve requirements and model carrying costs for several months.
- Align with your listing agent on pricing scenarios and time‑to‑market.
If buying before selling
- Choose the financing path that fits your equity, timeline, and risk tolerance.
- Assemble documentation that proves your exit plan for lenders.
- Keep your sale prep on schedule to shorten overlap time.
Operational details
- Coordinate a shared calendar across lenders, both agents, and escrow.
- Negotiate rent‑back or temporary occupancy if needed to smooth move‑out and move‑in dates.
- Involve your CPA and, for complex structures, a real estate attorney.
Work with a trusted local advisor
Buying before you sell in Los Altos is possible with the right plan, product, and timing. You deserve a discreet, data‑driven strategy that protects your leverage and minimizes overlap costs. If you are considering this move, connect for a private conversation and Request a Confidential Home Valuation. You can start with Stephanie Von Thaden for tailored guidance and a clear plan.
FAQs
How does buying before selling affect loan approval in Los Altos?
- Lenders typically count your existing mortgage in your debt‑to‑income ratio and require several months of reserves on both properties, especially for jumbo loans.
What is the main advantage of a bridge loan in this market?
- It helps you write a competitive, non‑contingent offer and close quickly while you prepare your current home for sale.
Is a HELOC or a bridge loan usually cheaper?
- A HELOC often has a lower initial cost, but its rate is variable; bridge loans are usually costlier but can fund quickly for a tight timeline.
Do most Los Altos purchases require jumbo financing?
- Many do, because home prices often exceed conforming loan limits; jumbo loans come with stricter underwriting and higher reserve expectations.
How can I reduce the risk of owning two homes longer than planned?
- Create a written exit plan, price your home realistically, keep sale prep on schedule, and coordinate overlapping escrows or a short rent‑back.
What tax rules should I know when selling my primary residence?
- You may qualify for the Section 121 capital gains exclusion if you meet ownership and use tests; review IRS Publication 523 and consult your tax advisor.
