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How do you buy a home with cash?

In today’s competitive housing market, there are many advantages to buying a house with cash, including winning bidding wars, and closing quickly on your home. Buying with cash is common among investors, baby boomers, but even some first-time home buyers.

Buying a home with cash will make the process different the traditional, financed approach. We’ll explore the steps from cash to close and the benefits of buying a house with cash.


Why should you make a cash offer on a home?

We’re currently in a seller’s market, which means there is much more demand than available houses. Many markets are seeing bidding wars, dozens of offers above the listing price, buyers waiving inspections, and people buying homes they haven’t even seen in person.

To win a bidding war, price is the primary factor. The more you offer, the more likely you’ll get the home. But when there are multiple offers with a similar sale price, other factors then come into play. Sellers look at several variables from inspection timelines to financing terms to appraisal guarantees.

Sellers love cash offers because it:

  • Allows the sale to proceed quickly
  • Removes uncertainty from the transaction
  • Avoids problems caused by lender requirements
  • Is less likely to fall through when compared to a mortgaged offer


What other benefits are there to buying a house with cash?

You’ll be mortgage-free, which means you won’t be beholden to a monthly mortgage payment. That sounds amazing! The peace of mind that many people experience knowing their home is completely theirs is priceless.

Additionally, you’ll also avoid the additional expense of mortgage insurance, and you’ll save thousands (if not tens of thousands) of dollars on interest. The average homeowner can easily pay over $100,000 in interest on a 30-year loan.

Lastly, buying a home will be much faster and easier than purchasing a home with a mortgage.


What does the process look like when buying a house with cash?

Buying a house with cash is different than buying a home with a mortgage. You can skip the entire pre-approval process. So, if you’re buying a house with cash, here is the process.

  1. Get your cash together


Very few people have hundreds of thousands of dollars sitting around in one place. Most people have money spread across several accounts, from savings accounts to investing or money market accounts. Thus, you’ll want to consolidate all your money (for the house) into one centralized place.


If you plan to liquidate any cash from a 401(k) or 529, it could come with fees and/or tax ramifications. You’ll likely want to talk to a financial advisor and a tax professional before proceeding to make sure you understand the full picture and the implications.


  1. Obtain proof of funds from the bank

Talk to your bank or institution that holds your money and ask them to provide a letter stating that you’re able to purchase in cash up to a certain amount and attach it with your offer.


Providing a proof-of-funds letter is more secure than forking over a bank statement, which contains sensitive information.


  1. Find your house

Now the fun part begins. Working with a real estate agent can help you narrow your choices and determine if the price that the seller is asking for the house is fair or not. Just because you have a certain amount of cash doesn’t mean you should overspend on a home.


  1. Make an offer

Once you’ve found the home you want, it’s time to make an offer. And as we discussed earlier, offering cash for a home purchase will make you more competitive.


  1. Choose a title company

Even though you won’t have to work with a lender, you’ll need to go through the closing and title process to make sure there are no problems with the home title and to ensure the transaction goes smoothly.


  1. Secure your earnest money check

If you’ve offered earnest money, get a cashier’s check for the amount. You’ll want to bring a cashier’s check instead of cash. The earnest money will be held until the sale is finalized.


  1. Get a home inspection

A home inspection will uncover any hidden problems with your soon-to-be new home.


  1. Title research

Title research is an important part of the homebuying process. You need to know about any liens or claims on the house before taking ownership. Also, purchase title insurance which insures your ownership rights to the property, should the title search miss something.


  1. Get homeowner’s insurance

Even though you’re buying your home outright, purchasing a homeowner’s insurance policy is a wise decision. After all, you’re investing your hard-earned cash into an asset worth hundreds of thousands of dollars. You want to make sure it’s insured in case something unexpected happens.


  1. Secure a check for the balance

Now that you’ve inspected the house, it’s time to prepare to pay for the home.


Secure a check for the balance owed, after subtracting the earnest money you’ve already put forth (if applicable). Pull the funds together in a cashier’s check or plan for a wire transfer.


  1. Conduct a final walkthrough

Just before the house closes, you’ll walk through one more time to make sure it’s in the condition you are expecting.


  1. Closing
    It’s time to officially become a homeowner! And paying via cash will make it happen much quicker than if you were borrowing money. Sometimes cash deals can close as quickly as in a few weeks.


In today’s housing market, cash is king. Making an all-cash offer is hard to beat. Doing so will save you a lot of money in interest payments and speed up the time it takes to close.

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