A cash buyer has all the money needed to be able to purchase a property. The idea of having enough cash to buy your dream home might be just a dream though. While it isn’t a must, you might be curious after hearing about people making all-cash offers to purchase properties in your neighborhood.
In a competitive market, there are advantages of paying cash for a home, including improving the attractiveness of your offer to sellers and no interest to be paid.
Is it possible to buy a house with cash?
There is absolutely nothing illegal about paying cash for a home, so yes, it is possible.
Buying with cash does not necessarily mean having money stacked in a briefcase but denotes full payment without financing.
The anti-laundering policy won’t permit walking around with a large sum. Therefore, buying with cash means having the complete property cost in the bank ready to be paid.
Why is cash better for a home purchase?
Since there is no possibility of a mortgage falling through or being denied, offering to pay with cash further increases the appeal of your offer to house sellers. Additionally, getting rid of the lender accelerates closure greatly. Buying in cash means different things:
- Peace of mind
- No debt or mortgage from a bank or another lender
- No chance of missing payments or foreclosure
Reasons to buy a house with cash
Compared to obtaining a mortgage, paying cash has both benefits and drawdowns.
- No other payments: If you pay off your house in full, you won’t have to worry about interest rates increasing or recurring mortgage costs.
- Lower closing expenses and quicker closing: Obtaining a mortgage involves delays and unwanted closing costs. Buying with cash accelerates closing and removes all charges.
Therefore, cash offers appeal more to sellers in a competitive market because a loan may not be approved. This provides you an edge over rivals.
- Cheaper purchase price: You might be able to win a home with a lower offer because cash agreements are more desirable than those involving financing.
- No need for a good credit score: You might not qualify for a mortgage if your income is inconsistent or if you have a low credit score. But paying with cash eliminates such worries about whether it would be approved or not.
Reasons to get a mortgage instead
Also, there are many benefits to enjoying paying through a mortgage. These include:
Lower return on investment: With all your money invested in your home, you would be left with little to no money to take advantage of some promising investment opportunities. A mortgage, in this sense, might be a better option.
No mortgage interest deduction: When submitting their tax returns, homeowners can deduct a portion of the interest they pay on their mortgage from their income. These savings are lost if you don’t have a mortgage.
Should I still get a home inspection?
Cash payment implies you can avoid applying for a mortgage. It does not mean, however, that you should forego doing your due diligence when purchasing a home.
Yes, a home inspection with your real estate agent is a good idea, even if you’re paying cash for the property.
There are cases home sellers put up a “cash buyers only” sign. Do well to ask your real estate agent to thoroughly inspect the property, as the property might have structural problems or the sellers want to move quickly. Either way, check out the property to know what you’re getting into.
What is delayed financing?
Delay financing allows you to benefit from the advantages of purchasing with cash, such as discounts and applying for a mortgage after.
Doing this might raise some questions from the lender. They might ask why you would obtain a mortgage for a property you just owned. Some lenders might require you to live in the new home for six months before applying. However, this tactic could be desirable, as you now have the money to make some investments.
Whether you’re purchasing a property for investment or private purposes, highlight your long-term and short-term goals and ensure they align. A professional in your corner can also help point you in the right direction when making such decisions.
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