When You Need Money From a Home Sale
You're buying a new home but need proceeds from selling your current house to complete the purchase. Maybe you found the perfect place but your existing home is still on the market. Fannie Mae allows lenders to count these anticipated proceeds toward your available funds, but they have specific rules about how much you can count and what documentation you need.
This situation comes up frequently in non-contingent purchases where you want to make a strong offer without a home sale contingency. The lender can approve your loan based on the expected proceeds, giving you more buying power and negotiating flexibility.
How Lenders Calculate Your Anticipated Proceeds
The calculation method depends on whether you have a signed purchase contract for your current home.
With a Signed Sales Contract
If you have a buyer under contract, the lender uses this formula: Sales Price - (Sales Costs + All Liens) = Estimated Proceeds.
Say your home is under contract for $400,000. You owe $250,000 on your mortgage and expect $24,000 in selling costs (realtor commissions, title fees, repairs). Your estimated proceeds would be $400,000 - ($24,000 + $250,000) = $126,000.
Without a Sales Contract
If your home is listed but not under contract, the lender uses: 90% of Listing Price - All Liens = Estimated Proceeds.
Using the same example with a $400,000 listing price: $400,000 × 90% = $360,000. Then $360,000 - $250,000 = $110,000 in estimated proceeds. Notice this gives you $16,000 less to work with than having a signed contract.
Required Documentation
The lender needs specific paperwork to verify these proceeds will actually materialize.
For the initial loan approval, you'll provide a copy of the listing agreement showing your home is actively marketed. If you have a signed purchase contract, bring that instead.
The critical requirement comes at closing. You must provide the settlement statement (HUD-1 or Closing Disclosure) from your home sale before or simultaneously with closing on your new home. This proves you actually received the proceeds the lender counted on.
If your home sale closes after your purchase, you cannot use this guideline. The timing must work so both transactions happen together or your sale happens first.
Why These Rules Exist
Fannie Mae requires the 90% haircut on listing prices because homes don't always sell for their listing price. Market conditions change, buyers negotiate, or inspection issues arise. The 10% discount provides a buffer against these risks.
The settlement statement requirement prevents fraud and ensures the proceeds actually exist. Without this documentation, borrowers could inflate their available funds or count on sales that never happen.
The simultaneous closing requirement protects both you and the lender. If your home sale falls through after you've closed on the new house, you could face serious financial strain carrying two mortgage payments.
Special Situations and Potential Complications
Employee Relocation Programs
If your employer is buying your home as part of a relocation package, different rules apply. You need a copy of the executed buyout agreement showing the purchase price and terms. A simple listing agreement won't work here because your employer, not the open market, is the buyer.
The buyout agreement must show your employer's commitment to purchase the home and the net proceeds you'll receive. This gives the lender certainty about the transaction that a regular listing cannot provide.
Like-Kind Exchanges
If you're doing a 1031 exchange where you're trading your current property for the new one, the proceeds can still count toward your purchase. The exchange must comply with Internal Revenue Code Section 1031 and be properly documented through a qualified intermediary.
Market Volatility Concerns
If your local real estate market is declining, the lender might apply additional scrutiny to your anticipated proceeds calculation. They could require a recent appraisal on your current home or apply a larger discount to the listing price.
Similarly, if your home has been on the market for an extended period without offers, the lender might question whether the listing price is realistic. Be prepared to discuss pricing strategy and market conditions with your loan officer.
Timing Coordination Challenges
Coordinating two closings can be complex. If your home sale gets delayed, you might need to find alternative funding sources or postpone your purchase closing. Some buyers arrange bridge loans or other temporary financing to handle timing mismatches.
Consider having backup plans in place, such as access to other liquid assets or family assistance, in case your home sale timeline shifts unexpectedly.
References
For the official guidelines, see B3-4.3-10: Anticipated Sales Proceeds in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B3-4.3-10, Anticipated Sales Proceeds (02/23/2016)
Determining the Amount of Net Proceeds
Sales Proceeds Needed for Down Payment and Closing Costs
Anticipated Sales Proceeds
If the borrower’s currently owned home is listed for sale but has not been sold, the lender may qualify the borrower on the basis of anticipated sales proceeds.
The lender must document the actual proceeds received by the borrower.
Determining the Amount of Net Proceeds
The following table describes how to determine the amount of net proceeds based on a borrower’s anticipated equity.
Yes
Sales Price – (Sales Costs + All Liens) = Estimated Proceeds
No
90% of Listing Price – All Liens = Estimated Proceeds
Sales Proceeds Needed for Down Payment and Closing Costs
If the proceeds from the sale of a currently owned home are needed for the down payment and closing costs on the new house, the lender must verify the source of funds by obtaining a copy of the settlement statement on the existing home before, or simultaneously with, the settlement on the new home, showing sufficient net cash proceeds to consummate the purchase of the new home.
Like-Kind Exchanges
Assets for the down payment from a “like-kind exchange,” also known as a 1031 exchange, are eligible if properly documented and in compliance with Internal Revenue Code Section 1031.
Employee Relocation
When the borrower’s employer assumes responsibility for paying off the existing mortgage in connection with a relocation plan, the lender must obtain a copy of the executed buy-out agreement to document the source of funds. A photocopy of a sales contract or a listing agreement is not considered an acceptable source of verification of proceeds from the sale.
