You have a huge amount of cash piled up, and you are looking to use the money to buy a new home. There are plenty of advantages to buying a house with cash like you are going to be mortgage-free. It means you are not going to be owed a monthly mortgage payment. The added cost of mortgage insurance can also be avoided, and you can save thousands of dollars in interest; over the life of a 30-year mortgage, on average you may potentially pay over $100,000 in interest. It is a process to buy a house with cash, though, and it can be a complicated task for many. If you want to know how to buy a house with cash follow this step-by-step guide.
Get the Cash Together to Buy a House with Cash
The first step is to make sure you have the money in one place to buy a house with cash. You may have enough money sitting in a savings account already, waiting to spend on the perfect house. But you will want to cash out those accounts and collect your money together if your cash is socked away in different ways, like stocks or money market accounts. Before cashing out anything, you will definitely want to talk to a financial planner and a tax professional to ensure you understand the whole picture and all the tax ramifications of cashing these types of accounts.
Get Funds Proof Letter
If you make a cash bid and you want to be successful, getting a letter from the bank to show that you have the cash available is a positive thing. Converse with the institution which holds your money and ask them to provide you with a letter stating that you can buy up to a certain amount of cash and connect it to your bid. It is safer to have a funds proof letter than to think over a bank statement that contains confidential details.
Make an Offer
Now all you need is to find your dream home and make an offer. In a seller’s market, offering cash for a home purchase will make you more competitive. Try adding contract contingencies to cover yourself in the agreement as you make the cash bid. While you would not need a finance contingency, an inspection contingency and an assessment contingency would work. If you provide your bid with an inspection contingency and an assessment contingency, you demonstrate to the seller that you would like to buy the home as long as the home inspection shows that the home is in good working status.
Find a Settlement Agent
While you will not have to negotiate with a lender, there is no escape from the closing and title process to ensure that the title of the home is not troublesome and that the transaction closes smoothly. Your settlement agent will help you out on certain things, depending on where the property is situated. He will operate to keep, pay for, and move money as an impartial third party, and he will also facilitate the search and transfer of the title.
Get a Home Inspection
It’s time to make sure that your soon-to-be new home does not have any concealed issues. Cash buyers will often include in their offer an inspection contingency for information purposes only. It means that you can walk away if anything is revealed, but you’re not going to call for repairs. In other words, if you include an inspection contingency for knowledge purposes only, you tell the seller that you would not require them to make repairs, no matter what the inspection shows, although you reserve the right to walk away should the inspection show a severe problem. Otherwise, you are ready to buy the house the way it is.
Acquire a Home Owner’s Insurance
If you want to purchase the property outright, you are not forced to insure it. However, it is a smart decision to buy homeowner’s insurance. You invest your hard-earned cash in an asset worth hundreds of thousands of dollars, so if anything, unexpected happens, you want to make sure it is covered. Ask your insurance provider if you are uncertain what type of homeowner’s insurance you can get.
Look for an Appraisal
Although you don’t require an appraisal when you’re paying cash, you might want to ensure that what you pay, for your own peace of mind, is worth the house you’re buying. One solution to this is to request an appraisal and bake a probability into the bid, so you can renegotiate or walk away if the house appraises even lower than the purchase price.
Secure a Check
It is time to plan to pay for the home now that you have inspected and appraised the property. After subtracting the earnest money, you have already put forward, secure a check for the balance owed. In a cashier’s check or plan for a wire transfer, pull the funds together.
Do a Final Walkthrough
You will step through one more time just before you buy new houses to make sure it is in the shape you did expect before the deal. Check to ensure that the house is perfectly cleaned and in sparkling condition. Look for things that should be there. See whether the owners removed the appliances, even though they were covered in the contract. Moreover, check that when they moved, the sellers did not leave a huge mess behind.
Come to the Closing
Since you are not applying for a mortgage, the closing process would be prompt. Often, depending on whether the cash buyer wishes to do an inspection or whether they find any title issues, a cash deal will close in a week or two.
Understand that if you purchase a property without having it thoroughly checked, you alone are responsible for any problems discovered after the sale. Being a cash buyer offers a wealth of possibilities that can enable both the buyer and the seller to smooth the operation. But please be careful to make sure that you don’t miss out on anything else.