How to Get Pre-Approved in Texas Before Selling in California
Securing a strong pre-approval in Texas while your California home is still on the market is a strategic move that gives you a competitive edge. Many movers from California to Texas worry they can't make a serious offer without cash in hand, but several mortgage strategies make this possible. The key is to demonstrate to the lender that the funds for your down payment are secure and accessible, even if they are currently tied up in your West Coast property.
Here are the primary pathways to get pre-approved:
Contingent Offer Pre-Approval: The most straightforward option is a pre-approval for an offer that is contingent on the sale of your current home. While common, this can make your offer less attractive to sellers in a competitive market like Austin or Dallas. Your lender will verify your California home's equity by reviewing your mortgage statement and a comparative market analysis (CMA).
Bridge Loan: A bridge loan is a short-term loan that 'bridges' the gap between buying your new Texas home and selling your old California one. It allows you to tap into your current home's equity for the down payment. Lenders offering bridge loans have strict requirements, often demanding significant equity and excellent credit. They can be costly, but they make your offer non-contingent and powerful.
Home Equity Line of Credit (HELOC): If you have substantial equity, you could open a HELOC on your California property before you list it. You can then draw from the HELOC for your Texas down payment. This also lets you make a non-contingent offer. Once your California home sells, you pay off and close the HELOC. This requires foresight and planning months before your move.
Asset-Based Lending: If you have significant liquid assets in retirement or investment accounts (aside from your home equity), a lender can use these to approve your loan. This strategy, sometimes called an asset depletion or asset qualifier loan, doesn't require traditional income verification, which is perfect for someone leaving a job.
To get started, you will need to provide a mortgage advisor with your California mortgage statement, an estimated sales price, and documentation for any other assets you plan to use.
Documenting Your California Home Sale Proceeds
Once your California home sells, a large sum of money will land in your bank account. Mortgage lenders must legally verify the source of these funds to comply with anti-money laundering regulations. Simply showing a large balance is not enough; you must provide a clean, clear paper trail.
Follow these exact steps to document your proceeds for the new Texas lender:
Secure the Final Closing Disclosure (CD) or HUD-1 Settlement Statement: This is the most critical document. It is the official record of your California home sale, itemizing all costs, the final sales price, and the net proceeds wired to you. Your escrow or title company provides this at closing.
Obtain Proof of the Wire Transfer: Get a copy of the wire transfer confirmation from the escrow company that sent the funds. This document should show the exact amount from the Closing Disclosure being sent from the title company's account to your personal bank account.
Provide Your Bank Statement: Finally, provide your lender with the bank statement showing the wire transfer arriving in your account. The amount on the wire confirmation must perfectly match the deposit amount on your statement. Any discrepancy can cause delays.
Pro Tip: Deposit the entire proceeds from the sale into one bank account and do not move the money around. Co-mingling funds or making large, unexplained withdrawals or deposits can create underwriting nightmares. Keep the money in that account until you are ready to wire it for your Texas home purchase.
Why a Large Down Payment Can Trigger a Review
A large down payment is a great thing, but it also triggers scrutiny from mortgage underwriters. Lenders are mandated by federal laws like the Bank Secrecy Act to source all large, non-payroll deposits to prevent illegal activities like money laundering. A sudden deposit of $600,000 from your California home sale will absolutely be flagged for review.
This review is not personal and is not an accusation. It is a standard compliance check. The underwriter's job is to verify that the money came from a legitimate, documented source. If you follow the documentation steps outlined above (Closing Disclosure, wire proof, bank statement), you will sail through this process.
Where movers run into trouble:
- Using Cash: If you took a portion of your proceeds in cash and deposited it, that becomes nearly impossible to source. Always use wire transfers.
- Receiving Proceeds from a Relative: If the home was owned by a parent and they are giving you the proceeds, this is considered a gift, not sale proceeds. It requires a different documentation process, including a formal gift letter.
- Undocumented Deposits: If your bank account shows your $600,000 in sale proceeds plus another recent, unexplained $50,000 deposit, the underwriter will question everything. Ensure all funds in the account are properly sourced.
Qualifying for a Texas Mortgage Without a Job
This is one of the biggest hurdles for relocators. You quit your high-paying California job to move to Texas, but now you have no documented income to qualify for a loan. Fortunately, lenders have solutions for this exact scenario.
Scenario 1: You Have a Signed Job Offer in Texas
This is the ideal situation. If you have a signed, non-contingent offer letter for a new job in Texas, most lenders will accept this as future income. The requirements are specific:
- The offer letter must state your start date, position, and guaranteed salary or hourly rate.
- The start date must typically be within 60 to 90 days of your mortgage closing date.
- The lender will need to verify the offer with your new employer's HR department.
- You will need to show you have enough cash reserves (separate from your down payment) to cover your mortgage payments until you receive your first paycheck. A common requirement is six months of PITI (Principal, Interest, Taxes, and Insurance) in reserves.
Scenario 2: You Are a Remote Worker
If you are keeping your California-based job and working remotely from Texas, the process is much simpler. You just need a letter from your employer stating they are aware of and approve your relocation to a Texas address and that your employment and salary will continue unchanged. You will provide your standard pay stubs and W-2s as usual.
Scenario 3: You Have No Job Lined Up (Asset Depletion)
If you have significant liquid assets, you can qualify without any employment income. This is called an asset depletion or asset qualifier mortgage. The lender calculates a 'monthly income' from your assets. A common formula is to take your total verified liquid assets (e.g., from your home sale and 401k), divide them by a set number of months (like 60), and use the result as your qualifying income.
Example:
- Net proceeds from CA home sale: $700,000
- Funds in a 401(k) account: $500,000
- Total assets: $1,200,000
- Lender's formula: $1,200,000 / 60 months = $20,000 per month qualifying income.
This strategy allows you to use your wealth to qualify for a loan, giving you time to find the perfect job in Texas without rushing.
Jumbo vs. Conforming Loan Strategy in Texas
With a large influx of cash from a California home sale, you have strategic choices to make. You could put down a massive down payment to get a smaller, conforming loan, or you could put down a standard 20% and take out a larger jumbo loan, keeping more cash for investments, renovations, or reserves.
A conforming loan adheres to the financing limits set by the Federal Housing Finance Agency (FHFA), which in 2026 might be around $785,000 for a single-family home in most Texas counties. A jumbo loan exceeds this limit.
Let’s analyze a scenario:
- Texas Home Price: $1,100,000
- Cash from CA Sale: $800,000
Strategy A: Huge Down Payment (Get a Conforming Loan)
- Down Payment: $315,001
- Loan Amount: $784,999 (just under the conforming limit)
- Pros: Lower interest rates, less stringent underwriting, very low monthly payment.
- Cons: Ties up a significant amount of your cash in the property.
Strategy B: Standard Down Payment (Take a Jumbo Loan)
- Down Payment: $220,000 (20%)
- Loan Amount: $880,000 (a jumbo loan)
- Pros: Frees up hundreds of thousands of dollars in cash for other investments, home improvements, or to maintain a large safety net.
- Cons: Jumbo loans often have slightly higher interest rates and require higher credit scores and more reserves.
The right choice depends on your financial goals. If you prioritize the lowest possible monthly payment and being debt-averse, Strategy A is appealing. If you want to leverage your cash for other opportunities and are comfortable with a larger loan, Strategy B is superior.
Using Gifted Equity in Texas
The term 'gifted equity' is often misunderstood. It does not refer to a relative giving you cash for a down payment (that's a 'gift of funds'). Gifted equity applies only when you buy a home from a family member for a price below its current market value. The difference between the market value and the lower sale price is the 'gift of equity', which can be used as your down payment.
Example:
- Your aunt owns a home in Fort Worth valued at $500,000.
- She agrees to sell it to you for $400,000.
- The $100,000 difference is the gift of equity.
For a conventional loan, this $100,000 can cover a 20% down payment ($400,000 x 20% = $80,000) and even some closing costs. You would need very little cash out-of-pocket. The documentation is simple but precise: a gift letter from your aunt stating the amount of the equity gift and that no repayment is expected. This must be noted on the settlement statement at closing.
Avoiding Capital Gains Tax on Your California Sale
For many California homeowners, the biggest financial win comes with a massive gain from their home sale. The IRS allows you to exclude a significant portion of this gain from taxes under the Section 121 exclusion, also known as the primary residence exclusion.
The Rules:
- Ownership and Use Test: You must have owned and lived in the home as your primary residence for at least two of the five years leading up to the sale date.
- Exclusion Amounts:
- $250,000 for a single filer.
- $500,000 for a married couple filing jointly.
Example Calculation:
- You are a married couple.
- You sold your California home for: $2,000,000
- Your original purchase price was: $900,000
- You made capital improvements (e.g., new roof, kitchen remodel): $100,000
- Your cost basis is $900,000 + $100,000 = $1,000,000
- Your capital gain is $2,000,000 (sale price) - $1,000,000 (cost basis) = $1,000,000
In this case, you can exclude $500,000 of the gain. The remaining $500,000 would be subject to federal and state capital gains taxes. It is crucial to consult with a tax professional before you sell to plan for any tax liability. Using the proceeds to buy your new Texas home does not automatically eliminate this tax burden.
Navigating a move from California to Texas comes with unique financial questions. If you're ready to create a clear plan for your mortgage pre-approval, our expert advisors are here to help. Explore your options and take the first confident step toward your new Texas home by starting your application today.
Author Bio
David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.
