Those who have enough cash to buy a house outright are at a definite advantage in today's economy. Cash purchases streamline the home buying process. Moreover, home sellers are likely to favor buyers who can pay in cash. Cash buyers pay much less for their homes in the long run, and the price for the house may even be reduced at the outset for those who pay in full upfront. Cash purchases eliminate the risk of loan denial either because of buyer disqualification or low home appraisal. Those who pay with all cash never have to worry about losing their homes because they can't afford to repay their mortgage loans. Financially and emotionally, paying with cash benefits the home buyer.
Sellers prefer cash buyers
Home sellers generally prefer quick and smooth sales. They know that even buyers who have been pre-approved for mortgages might be denied by the lender later in the sales process. A buyer who is an independent contractor might have difficulty proving two years of regular employment, and a buyer whose family member promised to take out a personal loan could later opt out. Therefore, sellers prefer to steer clear of buyers who have to apply for a mortgage. If you are buying with all cash, you have greater negotiating power. Sellers, recognizing the increased ease of sale, are often willing to reduce the house's price for cash buyers.
Cash purchases avoid the risk of low appraisals
Home appraisals. They are based on sales of comparable houses in the neighborhood, which could have sold for low prices for various unknown reasons. Lenders determine a house's worth by weighing it against comparable sales. A low appraisal could lead the lender to reduce the amount of the loan offer, even after the seller and buyer have agreed on a price. If the loan amount comes up short, the buyer often cannot afford to buy the home. All cash buyers sidestep mortgage applications, avoiding the need for a potentially deal-breaking home appraisal.
Cash purchases save money and time
Indisputably, cash purchases carry lower costs. Over the years, paying mortgage interest on a
30-year loan can double or triple a purchase price. Additionally, closing costs are significantly lowered when purchases are made with cash. Cash purchases also save buyers valuable time. They eliminate the need to gather elusive documents and search for the optimal lender.
Peace of mind is priceless
Most importantly, all cash purchases bring with them an inviolable sense of security. Owning your home outright means never having to worry about covering your mortgage. In the face of disaster, such as job loss or injury, full ownership eliminates the risk of losing your home to foreclosure. Moreover, if you have paid with all cash, you will have excellent equity in the house. In case of financial emergency, you can draw on that equity for quick cash.
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