Step 1 — We prequalify you for the new home first.

Before anything else, we determine the loan amount you'll need for the new purchase. You can qualify using conventional financing, a bank statement loan, asset depletion, a P&L loan, or any combination of these. This tells us exactly what size loan you qualify for and sets the foundation for everything that follows.

Step 2 — We appraise your current home.

An appraisal establishes the market value of the home you're leaving. We then lend you 75%-80% of the appraised value.

Step 3 — The proceeds pay off your current mortgage. Whatever is left over after the payoff is wired directly to your bank account to use as the down payment on the new home. One important note: those proceeds can also be used for home improvements on the departing residence if you believe renovations will enhance your sale price. Just be sure to set aside enough for the down payment, unless you have other funds available.

Depending on the appraisal outcome, we may need to adjust the loan size on the new purchase - but we won't know that until the appraisal is completed

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Step 4 — The departing residence payment is excluded from your qualification. This is the part that makes the program work. The loan on your departing residence is interest-only, and you do not make monthly payments. Because of this, when we qualify you for the new home loan, the payment, taxes, and insurance on the property you're leaving are not counted in your debt-to-income ratio. It's treated as if that property doesn't exist. This is significant. With most loans, you have to qualify to carry both payments simultaneously.

Step 5 — You buy the new home without a contingency. With your down payment funded and the departing residence excluded from your ratios, you move forward as a clean, non-contingent buyer.

Step 6 — You sell the departing residence and the loan pays itself off. These loans are for one year, with the possibility of extension if circumstances warrant it. When your home sells, the loan is paid off from the proceeds. You are not making monthly payments out of pocket as you would with a standard mortgage. If you pay it off before the year is up, you only pay interest for the months the loan was outstanding.

One important timing note: the departing residence must be listed for sale within 30 days of the loan funding. If you're planning any renovations before listing, get that work lined up before the loan closes to avoid delays.