Q: My husband and I are retiring and plan to sell our home of 37 years, pay off our debts, and buy a less expensive home nearby with no mortgage. A mortgage specialist told me no one does “gap loans” anymore. Our agent and friends warned us away from companies like HomeLight, citing high fees and short deadlines. On retirement income, we doubt we could qualify for another mortgage, although we have a good 401(k) balance. Renting in between would be costly, and our cats and dogs make it harder. Must we pray both closings line up? We would like a concrete path forward.
A: Your plan is sound. The advice you have received is not. You have more options than you were told, and the strongest one may be sitting in your 401(k).
Start with the gap loan. Bridge loans still exist. They are short-term loans secured by your home’s equity and repaid when it sells. Big lenders have largely abandoned them, but local banks and credit unions often still write them, at a higher rate plus closing costs.
Next, the option your specialist missed. Fannie Mae allows lenders to count retirement account balances as qualifying income, without you withdrawing a dime. A healthy 401(k) can qualify a retired couple for a conventional mortgage on the new home. You buy, move once with the animals, list the old house empty, and pay the new loan off when your home sells. Confirm in writing there is no prepayment penalty. Ask lenders whether they use “employment-related assets” income. If the loan officer looks puzzled, find another one. Do not cash out the 401(k) to buy outright; the tax bill could be painful.
On HomeLight, your friends have a point, but not the whole story. Its Buy Before You Sell fee runs about 2.9 percent of the sale price in Florida. If your home has not sold in 120 days, the company buys it at your loan payoff amount, keeps marketing it and returns the profit, minus its fee and holding costs. That is expensive insurance, not a trap. HomeLight is not the only player. Knock, Homeward, and others offer similar programs. Get two written quotes and compare fees, deadlines and the backup purchase price.
Now the item owners rarely want to hear. Homes with pets often show more wear than the people living there realize. Dog claws scratch floors and trim, fur gets driven into carpet, and cat urine can wick up behind baseboards and ruin the drywall. You live with it daily and stop seeing it. Ask your agent for a frank walk-through and say not to hold back. Some pet homes show no trace; others need expensive repairs. An empty house makes those repairs, and showings, far easier.
If none of the financing options fit, sell first and negotiate a rent-back, staying 30 to 60 days after closing. Southwest Florida inventory remains above pre-pandemic levels, which gives buyers more leverage to make a contingent offer.
Your path forward this week:
- Interview two or three lenders, including a credit union, about asset-based qualifying and bridge loans.
- Get your agent’s honest condition review and a written market analysis.
- Get competing buy-before-you-sell quotes.
- Decide on a sequence, then shop.
Faith and a solid plan make good partners. You can have both.
