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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Ariel Skelley/Getty Images February 24, 2022 Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. With limited inventory in the housing market, homebuyers in especially are rushing to snap up properties as soon as they’re listed. Some aren’t bothering to deal with borrowing any of the funds to make the purchase. Instead, they’re making all-cash offers. What is an all-cash offer on a house
What does an mean? All-cash offers take the need for securing a mortgage out of the homebuying equation, eliminating the potential challenges of working with a bank or lender. There are plenty of buyers who can afford to do it, too. According to from real estate brokerage Redfin, around 30 percent of home purchases in the first half of 2021 were all-cash deals, the highest figure since 2014. In some cities, all-cash offers are becoming the norm. For example, more than half of all purchases in Naples, Florida were all-cash deals. Not everyone who makes an all-cash offer is going to live in the property, though. Some of those homes and condos are , and those owners are often looking to pay no interest to a lender while earning money from tenants or travelers. Pros and cons of an all-cash offer
If you can afford to buy a house without borrowing a mortgage, you’re likely in a good spot with your bank account. However, make sure you weigh the potential upsides and downsides of : Pros
You could save a lot of money in the long run. The biggest upside for a cash offer is the long-term benefit of paying zero interest or principal on a mortgage, which can add up to over the typical loan term. By handing over the money in an all-cash offer upfront, you’ll avoid paying interest charges. You’ll have a more attractive offer and more bargaining power. All-cash offers tend to look especially appealing to sellers. Since hiccups can happen with securing financing from a lender — the appraisal can come back too low, or the buyer’s finances can change, for example — a buyer with cash looks like a sure bet. When your offer’s more attractive, you have more negotiating power. Think of it this way: Would you rather sell something to someone who can pay immediately, or someone who needs to ask someone to borrow up to 97 percent of the cash? You can cut your closing costs down. Since you won’t have to pay a lender to review your application or originate your loan, an all-cash offer can translate to significant savings in terms of . Cons
You could stretch yourself too thin. While paying in all cash helps you avoid getting into a 15- or 30-year loan contract with monthly payments, you could also wind up wishing you held onto some of that money. Ask yourself about worst-case scenarios: If you lose your job in three years and have no income, would the money you’re about to hand over for an all-cash deal make a difference in your stress level? You might wind up waiving some important steps in the process. When you get a mortgage, a lender will require an appraisal. When you pay with cash, you might be tempted to skip that step, leaving you susceptible to paying a lot more than the property’s value. You’ll pass up some potential tax perks. Paying interest on a home loan isn’t all bad news. When tax time arrives, homeowners with mortgages benefit from . If you pay in all cash, you won’t get that deduction. All-cash closing vs traditional closing
All-cash offers tend to close faster than deals where a mortgage is involved. However, it’s not as simple as forking over the money and shaking hands. There’s still work involved, and the seller will need to check some items off the list. In Chicago, for example, the seller will need to receive zoning survey certification, water certification, association documents if buying a condo, title documents and other formalized information about the property. Cash buyers will still have to deal with some paperwork, too, but the number of documents required is significantly fewer than what is required for a traditional financed closing. How to make an all-cash offer
Budget for both the property and extra expenses. In addition to having the money for the property, you’ll need to make sure that you can cover other costs such as , homeowners insurance and moving expenses. Prepare to prove your personal finances. A seller isn’t going to simply take your word that you have the money. Get proper documentation from your bank that shows you have the funds ready for the transaction. Be ready to be more earnest. All-cash offers are about the cash. With no lender involved, the seller might ask to see a bigger amount of when you sign the contract. Get a professional to look at what you’re buying. You’re paying a lot of cash, so once your offer is accepted, pay for a to verify there are no hidden flaws with the property. Better yet, have a contractor walk through it with you to help you identify potential projects and how much they could cost you. Bottom line
The ability to pay all-cash for a property can eliminate a lot of the stress of homebuying, but make sure it doesn’t derail the rest of your financial goals and obligations. Think carefully about the other big objectives on your radar — saving for retirement or paying for college for your children, for example — to determine if paying all-cash will impede those other goals. Compare the differences between to figure out the best move for your finances. Learn more
SHARE: Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles