I have bad credit, so I'm thinking about buying instead of renting. Are there any cons to buying a home with cash vs. having a mortgage?

Asked by Mr. Lewis, Broad River, Fort Wayne, IN Thu Mar 3, 2011

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Philip Roy’s answer
Philip Roy, Agent, Las Vegas, NV
Thu Mar 3, 2011
Hello Mr. Lewis,

In this market, in my opinion, I think that it would be very wise to purchase with cash and I do not think that there are any cons. If you had good credit there might be a couple cons by not being able to take advantage of leverage at low interest rates.
Web Reference:  http://www.buyvegasnow.com
0 votes
Jenn Tippmann, Agent, Fort Wayne, IN
Thu May 3, 2012
As fun as it isn't, it will help you in the long run to build up your credit. I work with some really great, easy going lenders who will guide you in the process.
0 votes
Edward D. To…, Agent, Auburn, WA
Wed Jun 8, 2011
Instead of paying all cash, another option is to buy on contract with a large down payment. Then you can
work on cleaning up your credit, using the money you still have over the period of a year or so. In this market there are sellers who would take a land contract if the down payment was large enough to offset the risk of
selling to you. One of the cons nobody mentioned is that if you have judgements or collections that could become judgements, liens would attach to real estate you own for up to 10 years. If you have enough cash to buy a house, you should be working on paying any debts you have.
Web Reference:  http://www.ftwaynehomes.com
0 votes
Dallas Texas, Agent, Dallas, TN
Mon Mar 14, 2011
If you have cash purchase a home then do so if you can't qualify due to bad credit.

Confer with CPA for your tax benefits

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
Joyce Stopa, Agent, Fort Wayne, IN
Mon Mar 14, 2011
Mr. Lewis: Let me first say that the advantages of having a mortgage are limited to the interest deduction allowed on your mortgage and a manageable monthly payment. This is a method used to lessen the cost of owning a home and to make home ownership more appealing. The whole nation benefits when a person buys a home instead of renting. However, as with any purchase, if you can pay cash, there are also many advantages: you can usually negotiate a better purchase price if paying with cash; there are no points paid to a lender; you do not incur the expense of mortgage insurance; and since you will own the property outright, your monthly expenses will be considerably diminished. You will still owe property taxes; however, these are usually also a deduction itemized on your federal form 1040. Hope this helps a bit. If not, consult with a lender in your area.
0 votes
The Biggs Te…, Agent, Fort Wayne, IN
Fri Mar 4, 2011
Mr. Lewis

All the responses are very good and worth the read but with cash it's more important than ever to do your own due diligence. In the purchase agreement you need to include provisions that protect you and allow you to get out of the agreement should something about the house not meet your standards. IF you’re buying a foreclosure that due diligence is even more important and starts with your purchase agreement. Your agreement should require all utilities be on for the inspection of the property. If you’re buying from the owner the other thing that would protect your positions would be to have the offer subject to an appraisal and the seller pay for a one year warranty. As a REALTOR I can find comps and tell you if you’re getting a good deal but an appraiser would be an independent 3rd party option of value.
0 votes
Darren Schor…, Agent, Woodburn, IN
Fri Mar 4, 2011
Mr. Lewis,
As Guy pointed out, the only real disadvantage of paying cash is opportunity cost(that you won't have that cash to go to something else). However, you could also consider that if you buy now with cash, and work to improve your credit, that you will be able to take some of your equity(cash) out of your home in the future, if the need should come up. I would recommend being sure to have 6 months worth of expenses in reserve(bank), if possible, as an emergency fund. There are actually great advantages to owning a home free and clear. I would be happy to discuss any of this with you, further.

Darren Schortgen, Broker-owner/Realtor
Advanced Realty
(260)385-7603
darren@darrenschortgen.com
http://www.FortWayneHomesList.com
0 votes
Doug Lucas, Agent, Fort Wayne, IN
Fri Mar 4, 2011
Courtney discusses a number of very good points. So, I will defer to his response with respect. To help you through the process and to be assured your interests are protected, please contact a Realtor to represent you in the process. A cash transcation can be quick. The cash process avoids a few steps involving a lender. A lender wants their interests protected, and in turn you, as the buyer. With cash, the lender side will not be engaged. Therefore, I highly recommend you employ a Realtor (at no cost to you in Indiana) to assist you. To further explore mortgage options, I also recommend you contact a mortgage broker (like Brenda Hermes at Ruoff Mortgage 260-489-5595) to seek the right lender for you and/or give you credit advice. The lending rules change daily, it seems. Consequently, it is good to recheck what you might have been told previously.
0 votes
Courtney Bon…, , Fort Wayne, IN
Fri Mar 4, 2011
You indicate that your credit is bad, that is understandable considering the past couple of years. It is a very common problem, that fortunately is not without options. Guy brings about a very good point, using your cash for a home does not allow for you to use that money elsewhere. Wells Fargo recently lowered their standards on obtaining financing. If your credit score is above a 500, they will do FHA financing with 10% down. If it is between 575-600, they will do FHA financing with 5% down. If your score is 600 and above, they will do FHA financing with the standard 3.5% down. Please call or email me for my Wells Fargo contacts.

Cash purchases are the smoothest and easiest real estate transactions. Banks are currently going through EVERY file with a fine toothed comb. With cash, you will avoid many of the transaction fee's that are associated with obtaining financing. You will also get all of the tax advantages of owning a home, except for the mortgage exemption, which is the least of the excemptions. The initial savings of doing a cash transaction, far exceed the mortgage exemption tax savings.

It is a great time to buy and I look forward to helping you if given the opportunity. Please feel free to contact me anytime to discuss these and many other options available to you.

Courtney Bontempo | Broker / Associate
Perfect Location Realty
124 W. Wayne St, Suite 202 | Fort Wayne, IN 46802
C 260.341.5442 | F 260.440.3339 | O 260.422.4000
http://www.ListWithBontempo.com
0 votes
Guy Gimenez, Agent, Austin, TX
Fri Mar 4, 2011
The only con is the opportunity cost. Using cash to pay for a home means you won't have that money available to make more money.

But as the dollar continues to lose value rapidly, putting it in something other than a bank will make sense as the purchasing power is being reduced daily.
Web Reference:  http://www.phgbrokers.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Mar 4, 2011
If you have bad credit, you may have no choice but to buy in cash because you need good credit to qualify for a mortgage. In any case, a conversation with a mortgage pro makes good sense - at a minimum you will learn whether borrowing money to buy a home is even an option for you.

If you offer cash, expect to provide a source of funds as part of the offer.

Best of luck to you,
Jeanne Feenick
Unwavering Commitment o Service
Web Reference:  http://www.feenick.com
0 votes
The Oliver T…, Agent, Ovilla, TX
Fri Mar 4, 2011
Mr. Lewis,
Due to the overwhelming amount of foreclosures and seller distressed properties I think it would be very wise to purchase with cash. The only cons for a mortgage would be the interest tax write off on your income return, but that is minimal at best. Find a great agent to get you a heck of a deal and pay cash, you will be very pleased and in a great position.
Have a Blessed Day!
0 votes
Tom Hansen, Agent, Fort Wayne, IN
Fri Mar 4, 2011
Can't think of any cons. Lots of pros. Contact me and we can go over some of your options and figure out what is best for your situation.
Web Reference:  http://www.thansen.cbrwg.com
0 votes
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