February 26th, 2016 6:56 AM by Jackie A. Graves
Having bad or no credit can be a huge obstacle in many
situations, perhaps none more difficult than when you’re trying to buy
a home. In fact, homeownership can be one of the biggest reasons
people set out to build good credit. But, while establishing a strong
credit history is the most common route to homeownership, it’s not the only way
anything else, you can buy a home with cash. In 2015, all-cash transactions
made up 30.1% of single-family home and condo purchases (down from a peak of
36.3% in 2012), according to real estate data company RealtyTrac. People may
have many reasons for buying a home with cash, but if you have bad or no
credit, it’s probably your only option.
people have terrible credit and they’re afraid they won’t qualify for a
mortgage,” says Diane
Saatchi, a senior broker with Saunders & Associates, a real
estate company in the Hamptons, on Long Island, NY. Then there are the cash
buyers who don’t want to deal with the credit world. “They don’t want to be
subjected to the scrutiny of a bank. … They like to live under the radar.”
you live in a very inexpensive part of the country, buying a home with cash
requires saving a lot of money — or making a lot of money.
you’re paying $100,000 cash, you’ve either saved for a very long time or you’re
coming from some money,” says Doris
Phillips, chief operating officer of Lake Homes Realty and a
real estate broker in Alabama and Georgia. Oftentimes, people who buy homes
with cash are purchasing luxury or secondary homes, she says.
the fact that buying a home with cash doesn’t require you to have good (or
any) credit, it can save time and money.
of times, with cash deals there’s only one Realtor involved, so you can really negotiate down the commission,” Phillips says.
costs tend to be much lower, as well.
don’t have to have mortgage insurance, you’re not paying mortgage tax, you’re
not paying lender’s costs and underwriter’s costs,” Phillips says. “You’re not
paying points to the lender.”
says a cash purchase could take about five days from start to finish, rather
than the several weeks that a mortgage requires. As far as logistics go, you
sign a handful of documents and wire the money from your bank account to the
purchases certainly have disadvantages, though. You can get a tax deduction for
paying mortgage interest, and interest rates are very low right now, so
borrowing is relatively cheap and allows you to do something else with all that
cash. And cash offers aren’t always going to win a bidding war. It really
depends on the seller.
up against cash buyers all the time,” says Scott
Sheldon, a senior loan officer with Sonoma County Mortgages in
California. “And a common theme with those people is that [they think] they’re
better than everybody. They tend to be very low-ball-oriented offers that we
tend to beat out regularly.”
other hand, it’s low risk for the seller.
deal is pretty much a sure deal,” Phillips says. “Mortgages can fall through
the crack with one simple thing.”
you’re not in a position to buy property with cash but still want to be a
homeowner, you can focus on building a good
credit score while saving for the purchase. Smart credit use,
like making payments on time and spending very little of the available credit
on your credit cards, will help you improve
your credit scores over time. You can learn more about fixing your credit here and track
your progress by getting two
of your credit scores for free every
month on Credit.com. And check your free
credit report every year at AnnualCreditReport.com.
By Christine DiGangi – To view the original article click here