Some people can qualify to stay in their current home while building their new home. This will have to be approved by the lender. This approach, if approved by the lender, can be a more economical strategy than selling your current home and moving to rental accommodations. Provided you qualify, the lender will require you to have access to the full down payment (refinancing your current home can be an option) and be able to support your current mortgage and property expenses and the new mortgage and property expenses in case your existing home does not sell.
For peace of mind and to ensure you have cash to work with, many people opt to sell before starting construction on the new home and reside in short-term rental accommodations or with other family members.