Buying Before Selling in Colorado: Bridge Loans and HELOCs

You can buy a new home before selling the old one in Colorado when one of four things is true: you qualify for both payments at once, you open a HELOC on the current home before it goes on the market, you use a bridge loan against the equity, or the seller of the new home accepts the sale contingency built into the Colorado Contract to Buy and Sell Real Estate. When none of the four is true, sell first and use a rent-back to stay put while you buy. This guide gives the Front Range cost of each path.

The Kenna Real Estate Group, Keller Williams DTC, runs both sides of these moves across the Denver metro, from Highlands Ranch and Centennial to Arvada, Aurora and Castle Rock. The order below is the one we walk through with every seller-buyer.

Start with the equity, not the listing

Every buy-before-sell plan runs on the equity in the current home. Pull three numbers before anything else:

• Net proceeds. Sale price minus the mortgage payoff, minus 5% to 7% for commissions, title, transfer and closing costs. On a $650,000 Denver metro home with a $300,000 payoff, net proceeds land near $305,000 to $318,000. The home equity and net proceeds guide shows the full worksheet.
• Both payments. The current principal, interest, tax and insurance plus the new home's payment. Lenders count both against your income until the old home is under contract with contingencies released.
• Cash on hand. Earnest money (1% to 2% of the new price) and the down payment have to come from somewhere other than the sale that has not happened yet.

A Smart Pricing Report on the current home turns the first number from a guess into a range you can plan on.

Path 1: Qualify for both payments

The simplest path. The lender approves the new loan with the old payment still counted in your debt-to-income ratio. Most conventional approvals want that ratio at or under 43% to 45% of gross monthly income, so a household earning $15,000 a month has room for roughly $6,500 to $6,750 in total housing and debt payments. Two Front Range mortgages of $3,200 each fit; two of $4,000 do not.

Once the old home closes, the payment drops off and you keep the new loan as is. Rental income from the old home does not count unless you have a signed lease and, on most programs, a history of landlord income.

Path 2: Open a HELOC before you list

A home equity line of credit on the current home funds the down payment on the next one. The timing rule is the whole game: banks do not open a HELOC on a home that is listed for sale. Apply 30 to 45 days before the listing date, draw the funds at the new closing, and pay the line off from the sale proceeds.

• Amount: most Colorado lenders lend up to 80% to 85% of value across the first mortgage and the line. On a $650,000 home with a $300,000 payoff, that is $220,000 to $250,000 available.
• Cost: variable rate, interest-only draws, closing costs from $0 to $1,500. Three months of interest on a $150,000 draw runs $3,000 to $4,000 at current rates.
• The catch: the HELOC payment counts against your debt-to-income ratio on the new loan, and the line has to be paid and closed at the old home's closing.

Path 3: A bridge loan

A bridge loan is a short-term loan against the equity in the current home, sized to cover the down payment on the new one and sometimes both payments for a few months. Terms on the Front Range run 6 to 12 months, rates run 2 to 4 points above a first mortgage, and fees run 1% to 3% of the loan. On a $200,000 bridge held 4 months, expect $8,000 to $14,000 all in. The post on bridge loans and their alternatives in Colorado compares lenders and the bridge loan guide for Colorado downsizers runs the numbers for a smaller next home.

The Kenna Real Estate Group works with Mike Oswald, VP of Mortgage Lending at Rate, NMLS 261003, Equal Housing Lender, who structures buy-before-sell financing, including bridge and dual-payment approvals, for Front Range sellers. You are free to use any lender. Read the Colorado home financing guide for the full menu.

Path 4: The sale contingency in the Colorado contract

The Colorado Contract to Buy and Sell Real Estate, the form approved by the Colorado Real Estate Commission, includes language that makes the purchase conditional on the sale of the buyer's current property, with a Conditional Sale Deadline written on the dates page. Three things to know:

• The seller keeps marketing. If the seller receives a second offer, the seller gives you written notice and you have the number of days written in the contract to remove the contingency or terminate and take the earnest money back. Sellers call this the kick-out.
• Acceptance depends on the market. In a Denver metro neighborhood where homes go under contract in 10 days with multiple offers, a contingent offer loses. In a neighborhood averaging 40 to 60 days on market, contingent offers close every month, and a listed-and-under-contract current home makes the offer far stronger than a not-yet-listed one.
• Price the concession. A seller who accepts a contingency wants something for it: full price, a shorter inspection period or a larger earnest money deposit.

The guide to making an offer on a Colorado home shows where the contingency and the deadlines sit in the contract.

Sell first and rent back: the other order

Selling first removes every financing problem and replaces it with a housing problem: where do you live between the closings? Colorado solves it with a Post-Closing Occupancy Agreement, a Colorado Real Estate Commission form that lets the seller stay in the sold home after closing as a tenant of the buyer.

• Length: the buyer's lender caps it. On owner-occupied loans the buyer has to move in within 60 days of closing, so 30 to 60 days is the practical window.
• Rent: anything from $0 (used as a negotiating chip in a multiple-offer situation) to the buyer's daily carrying cost, $100 to $200 a day on a $650,000 home.
• Deposit: the title company holds a deposit from the seller's proceeds, released after the walk-through.

Sixty days is enough time to write an offer, run the inspection and close on the next home when the search is already done. The guide to buying and selling a home at the same time in Colorado covers the rent-back negotiation line by line.

The sell-first math on the Front Range

The table compares the cash cost of each path for a $650,000 Denver metro home with a $300,000 payoff, moving to a $750,000 home, over a 3-month overlap.

Read across the row that matches your situation. A household with tight debt-to-income and no HELOC in place sells first. A household with $250,000 of equity and room in the ratio buys first with a HELOC or a bridge and skips the double move. Downsizers with paid-off homes have the widest choice; the post on selling first or buying first when downsizing on the Front Range and the Denver metro downsizing guide take that case further.

Lining up two closings in Colorado

Same-day closings work in Colorado because one title company can run both files. The order of the day:

1. Morning: the sale of the old home closes and funds. The title company wires the net proceeds.
2. Midday: the purchase closes with the proceeds applied to the down payment. The deed records with the county clerk and recorder the same afternoon.
3. Afternoon: keys to the new home; the movers arrive.

Set the sale closing at least one business day before the purchase if the two files sit at different title companies, and write the purchase contract's closing date after the sale's. When the sale slips, the contract's deadline extension language lets both parties agree to a new date in writing; without an extension the purchase contract can terminate.

When the old home does not sell

Plan for it before it happens. Three fallbacks, in order:

• Reprice in 14 days. A Denver metro home with fewer than 3 showings a week in the first two weeks is priced above the market. A 2% to 3% cut in week three costs less than a month of double payments.
• Rent it. A signed 12-month lease turns the old payment into a covered cost. Denver metro rents on a 3-bedroom detached home run $2,800 to $3,800 a month. Check the HOA's rental rules first; some metro-area associations cap rentals.
• A cash offer or a buy-before-you-sell program. These programs buy the home or set a floor price for a fee of 2% to 6% of the price. On a $650,000 home the fee is $13,000 to $39,000. Worth it when the alternative is losing the new home; not worth it when a 3% price cut solves the problem. The NAF Cash offer program in Colorado post explains one version.

Where to go next

• How the Kenna Real Estate Group helps sellers and the step-by-step guide to selling a house in Colorado
• Colorado mortgage pre-approval guide
• The Colorado home seller's guide and the Colorado home buyer's guide
• Homes for sale in Highlands Ranch, Centennial, Arvada and Castle Rock
• How we help buyers
• Meet the Kenna Real Estate Group agents

Talk to the Kenna Real Estate Group

The Kenna Real Estate Group, Keller Williams DTC, prices your current home, maps the equity, sets the financing path with a lender who does this every week, writes the purchase contract with the right deadlines and runs both closings through one title company. Call or text 303-955-4220. A live person answers. Not a robot, not a phone tree. While you plan, search every home for sale in Colorado.