#6 How Will You Pay For Your New Home?

Paying Cash for Your Home

Paying cash for a home has advantages and disadvantages. You will need to weigh all of these factors to determine if and how paying cash will impact your home purchase in the short and long run. A qualified financial adviser may assist you in determining if a cash purchase is the right choice for you.

• Expedience. A cash buyer is able to close on a home quickly by avoiding the loan qualification process, which, depending on the type of loan program, can be time consuming.
• Interest and Fees. Though the foremost advantage to paying cash for a home is to avoid mortgage interest, a loan has several other costs associated with it. A lender will charge closing costs, interest points and loan origination fees and will require an appraisal that is paid for by the buyer.
• Tax Advantages. Several tax advantages exist for buyers who use mortgage loans to purchase their home. A cash buyer will miss out on these savings.
• Investment Portfolio. Analyze investments in your portfolio combined with other potential investments to determine the best gain in the long run. The money invested in a real estate cash purchase may or may not, depending on the market, result in the highest profit when compared to other investments.

Obtaining a Mortgage Loan

Few individuals have enough savings or liquid funds to enable them to purchase a home with cash. Unless you are one of those people, you will need to apply for a mortgage loan, or a loan secured by your home, through a lender. The mortgage note shows existence of the loan and is a legal contract stating that a monthly payment will be made until the loan is paid in full.

Several types of loans exist with varying features, but most are simply variations of a fixed-rate or adjustable-rate mortgage. The size, maturity, interest rate and method of payment may all differ. Familiarize yourself with how these mortgage programs work so that you are able to understand your options. Your agent and lender will help you decide on the best loan program based on your individual factors and needs. Putting potential interest rates, prices and terms into our Mortgage Calculator may help you to decide what best suits you.

If you are a veteran, you may qualify for a VA loan. In addition, several types of non-traditional loans exist for buyers who are unable to qualify for a typical loan due to higher debt-to-income ratios or credit problems. Talk to your lender about your options if your credit report has negative information or if your credit suffers from other issues. Your real estate agent may refer you to a creative, non-traditional, more flexible lender with less strict criteria.