Buying a home while you still own one can create significant financial pressure. When sellers reject contingent offers, buyers may feel pressured to waive that protection to stay competitive. Yet waiving a home sale contingency carries risks, and keeping one doesn't guarantee a smooth transaction. The right approach depends on your equity, cash reserves, and ability to manage overlapping housing costs.
A home sale contingency protects buyers who need to sell their current home to finance a new purchase. Waiving it may strengthen an offer, but buyers risk carrying two properties if their current home doesn't sell in time. Equity, cash reserves, and financing options help determine whether that risk is manageable. Contract provisions and specialized loan programs may also give buyers alternatives to waiving the contingency outright.
The Risks of Buying Before Selling
A home sale contingency makes your purchase conditional on selling your current home first. Removing that contingency generally means you must proceed with the purchase even if your existing home doesn't sell in time.
Buyers often calculate the timing this way: “We close in October. Our first mortgage payment isn't due until December. We can sell in two months.” That timeline may seem manageable, but what happens if the house still hasn't sold six weeks later?
The real risk isn't necessarily carrying two mortgage payments for a month. It's needing to sell your current home at a price that no longer works for you. If the market softens, you may have to accept less than you planned or continue covering both properties' expenses.
Neither outcome may have been part of your original budget. Before making an offer, discuss the potential costs and financing options with your lender. It's far better to understand your limits before you're under contract.
There’s a Middle Ground for Contingent Offers
Buyers who need to sell their current home may struggle to compete with offers that have no contingencies. A First Right Contingency can offer a middle ground for buyers who need to sell their current home. It allows the seller to keep marketing the property while the buyer works toward a sale.
Tevis encountered this situation when he bought and sold a home at the same time. The seller wouldn't accept his contingent offer outright, so he proposed an arrangement that gave both parties more flexibility.
“We told them we're putting in a contingent offer. You can keep your house on the market. If you get another offer, you give us 48 hours to remove the contingency. So what that does is it kind of gives everybody the best of both worlds. I'm not happy about taking your contingent offer because you got to sell your house, but I'll keep mine on the market.”
— Tevis Durbin, Producing Branch Manager, Supreme Lending
Under this arrangement, the original buyer has a limited window to decide whether they can proceed without the contingency. If they cannot, the seller may be able to move forward with the competing offer, depending on the contract terms.
The strategy gives buyers a chance to compete without immediately waiving the contingency. However, if another offer arrives, they may need to proceed with the purchase before their current home sells. Buyers should understand the financial risk before making the offer.
When Waiving a Contingency Makes Financial Sense
Sometimes, a seller won't accept a contingent offer, and the buyer still wants the property. In that situation, the decision comes down to whether the buyer can manage the financial risk.
Under the Fannie Mae Selling Guide, an existing mortgage payment generally remains part of a borrower's debt obligations when qualifying for another home. Certain conditions must be met before a lender can exclude that payment from the calculation.
Two questions matter most. First, how much equity do you have in your current home? Greater equity may give you more flexibility to lower your asking price, depending on your mortgage payoff and selling costs. Second, can you afford two full mortgage payments for 60 to 90 days without financial hardship?
For buyers pursuing jumbo financing, Supreme Lending offers an option that may exclude the existing mortgage payment from debt-to-income calculations. Eligibility depends on meeting specific reserve, credit, and documentation requirements.
“We have a product where, if it’s a jumbo loan, we will let you buy the house and we won’t count your current house payment against you. You just have to have so much in reserves or in assets to basically cover both payments for either 12 months or two years if you had to. That’s kind of how we offset that risk.”
— Tevis Durbin, Producing Branch Manager, Supreme Lending
The option doesn't eliminate the obligation to pay both mortgages. It may help eligible buyers qualify for the new loan, but they still need sufficient assets to manage overlapping housing costs.
Not sure whether your finances support waiving a contingency? Talk to the Durbin Team to review your financing options before making an offer.
Most Buyers Skip the Equity Conversation
Buyers often focus on timing while overlooking the equity they have in their current home. A realistic assessment of their home's value, selling costs, and available cash can help them understand how much risk they can take.
Work through these questions with your lender before waiving a contingency:
- What is the realistic sale price of your current home in today's market?
- What will you net after the mortgage payoff, agent compensation, and closing costs?
- If your home hasn't sold after 45 days and you need to lower the price, what's your minimum acceptable amount?
- Could you cover two mortgage payments for 60 days without depleting the reserves needed for your new home?
If the numbers support the risk, waiving a contingency may be reasonable. If important questions remain unanswered, explore alternatives such as an Indiana First Right Contingency, provided that is the correct addendum for the arrangement being discussed.
The CFPB's homebuying resources can also help you assess your budget, financing options, and other costs before making an offer.
How Reserves Affect Your Financing Options
Buyers often underestimate the reserves needed to purchase a new home before selling their current one. These assets provide a financial cushion and may also determine whether a buyer qualifies for certain loan programs.
The jumbo loan guidelines specify reserve requirements based on whether the existing home is under contract. The guidelines discussed for this program call for six months of reserves when the home is under contract and 24 months when it isn't. Eligible borrowers must also meet the program's credit and documentation requirements.
The new home's loan-to-value ratio (LTV) affects the overall loan assessment. However, a lower LTV doesn't replace the need to meet the program's reserve requirements.
Move-up buyers in Hamilton County or the Elkhart area can also explore how bridge loans work for contingency-free offers. A bridge loan provides temporary financing that can help buyers purchase a new home before selling their existing property. It has separate costs and qualification requirements, so buyers should compare it with other available options.
Home Sale Contingency Questions, Answered
What is a home sale contingency, and who does it protect?
A home sale contingency makes a purchase conditional on the buyer selling their current home. It protects buyers who need the proceeds from that sale to help fund their next purchase. Without the contingency, buyers may still be obligated to complete the new purchase even if their existing home hasn't sold. Sellers can accept, reject, or negotiate the contingency as part of the offer.
What is a First Right Contingency in Indiana real estate?
A First Right Contingency may allow a buyer to make a contingent offer while the seller continues marketing the property. If another offer arrives, the original buyer must respond within the deadline specified in the agreement. Depending on the contract terms, the buyer may need to remove the home sale contingency and proceed or step aside. Confirm the addendum's formal name and terms before relying on this strategy in Indiana.
When does waiving a home sale contingency make financial sense?
Waiving a contingency may make sense when your finances can support the purchase even if your current home takes longer to sell. Estimate your net sale proceeds after the mortgage payoff, agent compensation, and closing costs. Then determine whether you can cover both properties' expenses for 60 to 90 days or longer. Your decision should account for a lower selling price or a delayed sale, not just your ideal timeline.
What happens if I waive a contingency and my current home does not sell in time?
You may remain contractually obligated to complete the purchase, depending on your agreement and any other protections that apply. If you close on the new home before selling the old one, you may need to cover both properties' expenses. A delayed sale or price reduction can put additional pressure on your cash flow. Review your financing, available reserves, and contract obligations before waiving the contingency.
What reserve requirements apply to Supreme Lending's jumbo loan option?
The jumbo loan guidelines require six months of reserves if the existing home is under contract and 24 months if it isn't. Eligible borrowers may be able to exclude the departing home's mortgage payment from debt-to-income calculations if they meet the program's requirements. Credit and documentation criteria also apply. Confirm the current reserve figures and eligibility rules with your lender before relying on this option.
How does debt-to-income ratio affect a buyer who wants to purchase before selling?
Debt-to-income ratio (DTI) compares a borrower's monthly debt obligations with their income. When an existing mortgage payment remains part of the lender's calculation, it can make qualifying for another home more difficult. Some eligible jumbo loan programs may allow the departing home's payment to be excluded if the borrower meets specific requirements. Ask your lender how the applicable guidelines affect your qualification.
Can I use a bridge loan instead of waiving a home sale contingency?
Yes. A bridge loan provides temporary financing that can help you purchase a new home before selling your current property. Depending on the loan structure, it may help fund the down payment or cover costs associated with the move. Bridge loans have their own fees, qualification requirements, and repayment obligations. Compare those costs with the risks of carrying two mortgages or making an offer contingent on your existing home selling.
Build a Plan Before the Pressure Hits
There is no universal answer to whether waiving a contingency makes sense. Every buyer in this position should work through those questions with a lender who can run the numbers honestly and without an agenda.
The same processing and underwriting staff have been with the Durbin Team for six to eight years. The people handling your file have seen complicated situations before. That experience matters when you’re facing a decision this layered.
If you’re a move-up buyer in Indiana weighing this choice, start with a real conversation about your equity, reserves, and options. Reach out to the Durbin Team at Supreme Lending to build a plan before the offer pressure starts.