In order to understand how to buy a cash-only house with a loan, you must consider why the property is being listed as a cash-only property by the homeowner and be prepared for anything. Often, these sellers know their property won’t meet structural standards, and they want to sell as quickly as possible.
Additionally, if the housing market is booming, there may be bidding wars on the property, and the homeowner knows they want a seamless sale. When real estate agents are chomping at the bit to get their clients into properties, sometimes quick cash-only deals are tempting. For one, they close fast.
Traditional mortgages take time to close. In most cases, you will have to wait for the underwriting process, home inspections, and often, 30+ days of escrow to secure the home-buying process.
In contrast, when you buy a cash-only house your purchase does not have to meet strict structural standards because most of these properties require immediate renovations. Most loans offered on cash-only transactions are secured by private investors; the loan approval process is focused on ensuring the property meets adequate collateral.
Now that you understand why these properties are listed for cash offers only, we can show you how to buy a cash-only house with a loan.
Loan Types:
Hard Money Loans.
Hard money loans are often utilized as an investment. These loans are secured by real property and can be accessed for short-term and long-term use. The funds received through these loans are often supplied by investors, companies, and individuals. Uniquely, these loans are very versatile. You can get a short-term hard money loan for flipping a house. In this scenario, you can quickly finance an investment property, repair damages, gain instant equity, and either refinance at that point or sell the property and repay the debt.
Take Out an FHA 203(k) Rehab Loan.
New and existing homeowners can use the FHA 203(k) Rehab loan. These types of loans provide funds for renovations and upgrades. There are two options for the Rehab loan. First, you have the standard 203(k) Rehab Loan; second, you have the limited 203(k) Rehab Loan.
The standard loan amount starts and $5,000 but can go all the way to 110% of the property value. Borrowers typically use these loans for kitchen remodeling, bathroom upgrades, roofing, and large projects that will instantly increase the property value of your current home.
The limited loan is designed for projects below $35,000. The idea behind these loans is to quickly receive funding to repair your home and increase home equity fast. Remodeling loans are an excellent source of low-interest money. Since you are borrowing against your home equity, the monthly payments are typically much lower than credit cards, which usually have high-interest rates.
You can pay 100% in cash.
Ultimately, when it comes to a seller’s market, competition is fierce. Cash buyers are always the hidden gem for realtors. It would be lovely if every person alive could have the financial liquidity to pay cash for the purchase price of a new home. Imagine streamlining past the pre-approvals and never stressing about a loan defaulting or any foreclosure since you don’t have a monthly mortgage payment. If you are lucky enough to be in this situation, congratulations!
Key Take Away
Benefits:
- To buy a cash-only house is quick! Since the property itself is the collateral, not the applicant, these loans typically move quickly through the underwriting process.
- Portfolio growth! Invest, invest, invest, and grow that portfolio.
- If you have the cash, it’s a simple process.
Drawbacks:
- It’s risky; you must ensure you don’t default on the loan.
- What can go wrong usually does. Universally, repair costs are more than you anticipate.
- Once you commit, you’re in for the long haul. Take your time and do things the right way.
Things to consider:
How to buy a cash-only house with a loan? Have decent credit, and look good on paper. Although your personal credit score isn’t as heavily scrutinized with hard money loans as it is with a conventional loan, it is considered. The basic rule is despite the current mortgage rate; your mortgage interest will reflect your financial responsibility. If you have good credit, stellar payment history, and shine like a brand-new penny, your lender will work to get you a better interest rate.
Mortgage lenders will need you to be prepared to pay the down payment (Link to minimum downayment article), closing costs, application fees, loan origination fees, and in some cases, inspection fees. Additionally, you must provide proof of funds for the entire loan amount if you are paying cash.
Considering the fact that the property itself is the collateral for the loan, you are responsible for ensuring that the investment property is secured. Even when you are just flipping and don’t plan on occupying the home, your investors want their money insured and protected. Consequently, no matter how long you own the property, you are still required to carry homeowner’s insurance and pay the property taxes.
Now you know how to buy a cash-only house with a loan.
Let’s connect you with the people that can help.
Your home plays a major role in financial security. So, regarding your mortgage loan, you want to be sure you’re making responsible decisions. Undoubtedly, the loan process invokes insecurity in many people. In particular, navigating through a sea of paperwork and financial jargon can be unsettling without honest guidance. In fact, a lack of clarity can lead you down the wrong path and compromise your financial future.
If you buy a cash-only house or need a loan, you deserve to work with a lender who brings clarity and has your best interest at heart. Whether you are looking to purchase a home, help with refinancing, lower interest rates, or specifically ensure that you have made the best decision for the life of your loan, Mortgage Insiders can help you after helping thousands of families reach their goals to create stronger financial futures.
The steps are simple:
1. Schedule a Call: An experienced loan officer can discuss your needs and guide you through the possibilities.
2. Get Approved: We’ll help you through the application process and facilitate the steps for approval.
3. Exhale: Put your feet up and feel secure knowing you made the best decisions about your home loan.
With proper guidance, you can get your first home, accommodate your growing family, or start that renovation project—whatever goal is on the horizon. An alliance with Mortgage Insiders will give you the confidence to know that your mortgage loan is setting you up for financial success. Mortgage Insiders offers today’s latest financial news and mortgage trends. Check out their channel for current events.
