Do you have the cash on hand to buy your next house? You may be debating if you should get a mortgage or just pay for the entire home with cash. With the current 30 year fixed mortgage rate being 3.69%, you may think it's a simple question of asking yourself if you can make a return that's bigger than 3.69% over the next 30 years. It can actually be more complicated than that. Here are 2 reasons why you should use cash to buy your home.
Cash Offers Have A Greater Chance Of Being Accepted
If you are looking for a home in an area that is a seller's market, meaning that home inventory is low and demand from buyers is high, homes will often get an offer made on them soon after they are listed for sale. In fact, it's very possible for a great home to get several offers, and the buyer needs to select which one they want to go with.
It can be hard to stay competitive when you don't know how much over the listing price other buyers are offering, and you can potentially lose a home from being under by a couple thousand dollars. Having a cash offer can help you stand out from the other offers being made because having cash guarantees that you do not need to go through the mortgage process when buying your home. Your financing is already secured, and the seller will be aware of this when selecting your offer.
A seller that is motivated to close on the home quickly may find a cash offer more appealing since that transaction is faster than the mortgaging process. They may have also gotten burned by a buyer in the past that had a mortgage fail late in the home buying process, which stops the sale if it was contingent on getting the mortgage.
Appraisals Aren't A Problem
When the market is competitive and buyers are making offers above the list price, you run into the possibility of the appraisal valuing the home much lower than the offer price. Mortgage lenders do not like this and could deny a mortgage because they feel that the home is overpriced. Paying with cash cuts out the requirements of the lender, allowing you to have the final say in how much you want to pay for a home.
Paying with cash gives both the buyer and seller peace of mind because they don't have to worry about the mortgage process slowing or stopping a sale. Now that you know of some advantages of paying with cash, you'll consider making a cash offer on your next home purchase.