Q: We currently live in a SF home but want to buy another home, can we use our current home as collateral,[?] it is free and clear.
A: Yes, one way that has been brought up is that you can do a cash out refinance. I didn't read where you said you would be buying the new home as a primary residence, so if you are going to remain living in your current home then you could very easily do it as a primary residence since you'd still be living there. Even if you are going to be buying this new home as an eventual home for your retirement, etc. but will be remaining in your current home for at least the 1st year of the new mortgage you could do the refinance as a primary residence.
Depending on how much the new purchase price is as well as how much cash out you could get from your current home, you may be able to purchase the new home free & clear or if it's not enough to buy it outright you could get the down payment out of your current home and use it to get more attractive financing terms on the purchase.
I have to ask though... are you really buying in Tulia, TX or did you just type in "Trulia" and Tulia was the closest match?
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