Start with net proceeds, not sale price
Sale price is a headline. What matters is the number that hits your account: sale price minus the loan payoff, minus selling costs, minus anything you agree to pay for the buyer.
Budget 6%–10% of the price for the full cost of selling. That usually includes agent commission (negotiable, and since 2024 buyer-side compensation is negotiated separately rather than assumed), title and escrow fees, transfer taxes in some states, prorated property taxes, repairs found at inspection, and any closing-cost help you offer the buyer to keep the deal together.
Selling and buying at the same time
If you need the equity from this home to buy the next one, the two closings have to be sequenced. The common tools are a sale contingency in your purchase offer, a rent-back agreement that lets you stay in the sold home for a short period, or a bridge loan.
Lenders will count both housing payments in your debt-to-income ratio — how your total monthly payments compare to your gross monthly income — unless the sale has already closed or the departing home is documented as rented under the program's rules. Ask your loan officer which documentation lets the old payment come out of the calculation before you write an offer.
Taxes on the profit
Under IRS Publication 523, most homeowners can exclude up to $250,000 of gain ($500,000 for married filing jointly) if they owned and used the home as a main residence for at least two of the five years before the sale.
Gain is not the same as the check you receive: it's the sale price minus selling costs minus your adjusted basis (purchase price plus capital improvements). This is exactly why keeping improvement receipts matters. Partial exclusions can apply for work, health, or other unforeseen moves — confirm your situation with a tax professional.
Is this path right for you?
Frequently asked questions
How much are seller closing costs?
Plan on 6%–10% of the sale price, with agent commission the largest piece. Title, escrow, transfer taxes, prorated property taxes, and buyer concessions make up the rest.
Do I pay taxes when I sell my house?
Often no. IRS Publication 523 allows excluding up to $250,000 of gain ($500,000 married filing jointly) if you owned and lived in the home two of the last five years.
Should I sell before I buy?
Selling first gives you certainty on proceeds and removes the second payment from your debt-to-income ratio. Buying first is faster but usually requires qualifying for both payments or a bridge loan.
Related guides
- The Complete First-Time Homebuyer's Readiness Guide
- How much home you can actually afford
- Pre-approval checklist
- Back to the Knowledge Center
Run your numbers
Take what you just learned and apply it to your file.