Where can you get a mortgage?
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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing interactive tools and financial calculators, publishing original and objective content, and allowing you to conduct research and compare information for free, so you can make financial decisions with confidence.
Buy a house without a mortgage
Can't decide whether to buy a home for cash or take out a mortgage? Security is one of the main advantages of being able to buy a house in cash. You know that the property is 100% yours and you are not overwhelmed by monthly mortgage payments. But when it comes to rental property, your priorities are likely to be a little different, and buying a home with cash isn't necessarily the best way to ensure the highest return on your investment.
Regardless of whether you own property or pay a deposit and take out a bank loan, the capital growth is yours (minus any capital gains tax due). So if you have a mortgage, you benefit from the growth of the bank's money and your own. This means that you could make a much higher profit by dividing your equity among several properties, rather than investing it all in one.
Even if you think you're saving a lot and increasing your monthly rental benefits by not having to make mortgage payments, if you have more properties, you'll obviously receive more rent.
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You may have some type of debt, be it student loans, credit card debt, or something else. However, if you're on your way to becoming debt free, it might be time to think about investing in a home.
Your credit score plays an important role in your ability to obtain a home loan. It is usually lower when you are starting your career or when you have just graduated from university. As you pay down your debts and prove yourself a reliable borrower over time, your credit score will rise. You are eligible for most mortgages with a credit score of at least 620.
Contrary to popular belief, you don't need a 20% down payment to buy a home. It is now possible to buy a house with as little as a 3% down payment on a conventional loan or a 3,5% down payment on a Federal Housing Administration (FHA) loan. You may even be eligible for a Veterans Affairs (VA) or US Department of Agriculture (USDA) loan with no down payment.
In most cases, you'll find that you benefit when you bring a larger down payment to the closing table. A 20% down payment will allow you to avoid paying private mortgage insurance (PMI). PMI protects your lender if you default on the loan. Most lenders require you to pay PMI if you don't put 20% down on your loan. You can save thousands of dollars in insurance costs over time with a solid down payment. It might be time to invest in a down payment if you have the money saved.
What would be the negative aspect of buying a house with cash instead of a mortgage?
Being prepared to pay cash can give you an edge with motivated sellers eager to close the deal, but it can also help you with sellers in real estate markets where inventory is tight and bidders may be competing for the property.
The first step to buying a house with cash, of course, is getting it. Unless you have that much money in the bank, you may have to liquidate other investments and transfer the proceeds to your bank account. Keep in mind that selling securities you've made a profit on will cause you to pay capital gains tax.
1. You are a more attractive buyer. A seller who knows you're not planning to apply for a mortgage will likely take you more seriously. The mortgage process can take a long time, and there's always the chance an applicant will be rejected, the deal will fall through, and the seller will have to start over, says Mari Adam, a certified financial planner in Boca Raton, Florida.
2. You could get a better deal. Just as cash makes you a more attractive buyer, it also puts you in a better bargaining position. Even sellers who have never heard the phrase "time value of money" will intuitively understand that the sooner they receive their money, the sooner they can invest it or put it to another use.
