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With Lenders Approving More Loans, All-Cash Home Sales Drop

[Post Category: Industry News, Miscellaneous]

Many High-Asset Buyers Opt For A Mortgagecurrency

Buying a house with cash is the perfect solution for some home buyers.

Their monthly housing costs will be just a fraction of what they would be with a mortgage.

But many buyers with the ability to pay cash choose to get a mortgage. This seems counter-intuitive, but financing with a home loan comes with its own advantages.

For some, a large sum in a savings or investment account is more appealing than a mortgage-free lifestyle.

Those who choose to open a loan will find that mortgage rates are low and guidelines looser than they were just a few years ago.

There is no single “right way” to buy a home. But those who can pay cash might consider the advantages getting a mortgage too.

Cash Sales Are Falling

While there are good reasons to pay cash, those reasons should not include avoiding the mortgage application process or fear being turned down.

Tight mortgage regulations led to skyrocketing cash sales 2011. Nearly 47% of home purchases were all-cash in January of that year, according to real estate data website Corelogic.

In January 2016, cash sales accounted for just 35% of the market.

Mortgage guidelines are loosening and rates are falling. More home buyers and investors today find that getting a mortgage is not as hard as it used to be.

Still, a significant number of buyers choose cash for a number of other reasons.

Buying A House With Cash Comes With Advantages

There are many situations in which a buyer finds that they can pay cash for a home.

Downsizing home buyers as well as those who have spent significant time saving are faced with the question, “Should I pay cash for my home?”

It can be a great relief not to have to pay interest and principal monthly, which quickly add up. It frees up a budget to only pay real estate taxes, homeowner’s insurance, and HOA dues each month.

Home buyers who are near retirement may want to reduce expenses to align with their new incomes. Even younger buyers may want to pay cash to increase their ability reach other financial goals.

But an often-overlooked reason to pay cash is to help you beat out other buyers for the best properties. Cash offers are very attractive to sellers, since there is little chance their financing will fall through.

Mortgaging buyers occasionally lose out to cash buyers in hot markets such as New York City and Los Angeles, where sellers are selective and want to close fast.

A cash offer certainly does not guarantee the deal, but it can increase your chances of getting the home you really want.

Benefits Of A Mortgage

For most home buyers, paying cash is not an option. Fortunately there are plenty of low- and no-down-payment programs available such as FHA home loans and USDA mortgages.

But even for potential cash buyers, there are reasons to opt for a mortgage, according to Ray Rodriguez, Regional Mortgage Sales Manager at TD Bank in Mt. Laurel, N.J.

Rates are at historic lows

How low? They often can be secured below 4 percent for a conforming, 30-year fixed loan and below 4 percent even for a jumbo loan above $417,000 in many areas of the country.

Though crystal-ball gazing is unreliable, many observers expect rates to remain low until year end.

Payments may improve your credit score

Paying installment or revolving loans on time leads to higher credit scores. A score above 740 is considered excellent and will improve your chance of getting a mortgage at a good rate.

In fact, a stellar score may lower your interest payment by one-quarter of one percent or more.

You could be eligible for a tax deduction

This can be a sizable deduction when you file your federal tax payment, as long as you itemize deductions and exceed the standard deduction amount. On average, most Americans who have a mortgage receive a deduction of $1,900, according to recent data.

Consult your certified tax advisor before filing, but a mortgage interest deduction could significantly reduce your tax burden.

You can choose your own mortgage payment

You don’t have to take on the biggest mortgage payment possible.

These days, you can keep the monthly number to what you might have been paying for a rental, if you’re a first time homeowner or even a seasoned one who wants funds for other purposes–travel or helping with a grandchild’s college education.

For example, if your monthly lease was $2,000, go for a mortgage that’s in the same range. In fact, many first-time buyers who are part of a two-wage couple are advised to limit their mortgage payment so that it’s payable with only one of their incomes.

What Are Today’s Rates?

Paying cash or getting a mortgage does not have to be an all-or-nothing proposition.

Many buyers make a large down-payment, retain some cash, and have a very small mortgage payment.

Buying a house with cash comes in a spectrum of options. For those who choose to take a large or small mortgage, low rates are widely available.

Get a mortgage rate quote for your upcoming purchase to see if paying cash or getting a mortgage will fit your situation.

 

 

 

 

 

 

 

as appeared in mortgage report

   

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