Truffle - I think it has to do with not having adequate down payment until the current residence is sold.
Our title company says title insurance does not find an issue with this practice because of the "after-acquired property" clause. Wiki for "after acquired property" states:
The term "after-acquired property" also arises in the context of bankruptcy, secured transactions, and the law of wills. In this context, "after-acquired property" is simply property which is acquired by a borrower after a security agreement is signed, by a debtor after a bankruptcy case is commenced, or by a testator after a will is made.
In the case of secured transactions, whether the after acquired property becomes part of the collateral pledged by the borrower is dependent upon both the language of the security agreement and § 9-204 of the Uniform Commercial Code.
Section of 9-204 of the UCC deals with "personal property" and not real property based on what I am reading. I am still not comfortable with this.