Paying Cash vs. Financing

Pros

1. No need to be concerned that there is a mortgage on your home.
2. No time, effort or cost of getting a loan, no points, no origination fee, no loan fee, etc.
3. No interest payments. Interest on a 30 year mortgage at 10% ends up being nearly twice the amount borrowed.
4. Cash has greater buying and negotiating power.
5. Can always borrow against the property later.
6. Can try to time when rates are lowest, then borrow for 30 years.

Cons

1. Greater leverage by borrowing.
2. Mortgage rates are usually lowest rates.
3. Interest and closing costs are tax deductible.
4. Mortgages at late dates could be considered refinances and charged higher rates, or rates could go up and applying later could be harder.

Here are some important questions to ask when shopping for a home loan:

1. Is the loan assumable? Under what conditions can it be assumed?
2. Does the rate fluctuate? How?
3. Can the original borrower be fully released? Is there a charge?
4. Is there a pre-payment penalty? Is there a minimum pre-payment amount? What happens if the loan is paid off early?
5. Is there a Private Mortgage Insurance (PMI) requirement? Can it be removed? How?
6. Can taxes and insurance be paid separately from the loan payment? Can this arrangement be changed by the borrower or by the lender?

1. Personal Savings
2. Gift Letter
3. Personal Reserves/Sellable Assets
4. Home Equity 5. Joint Ownership

Our Real Estate Professionals are involved with, and informed about, the major types of home financing, including:

FHA
VA
Conventional
Assumptions
First Time Home Buyers
Jumbos
Adjusted Rate
Graduated Rate
15 Year Fixed Rate
30 Year Fixed Rate
and more...

We work with many mortgage brokers throughout the area and can inform you of different financing alternatives and help you arrange appropriate financing.

Borrowing enough money to buy a house can be intimidating. I can guide you through the process. Below is a listing of some of your options when choosing a lending institution, and deciding on what kind of loan to obtain. Look over the information, and we can discuss which ones might be right for you.

A Mortgage

A mortgage is a loan for the cost of the property. The title is held by the lending institution until you pay the loan back according to its terms. The length of time you have to pay it back, under what circumstances you can repay early, the interest rates you pay for use of the loaned money, and other terms, are all spelled out in the contract for your mortgage. You will be expected to put some cash money into your purchase, and you may have to prove to the bank that you have enough other money to make your payment. Some mortgages are assumable, meaning the person you sell the house to can assume your debt, and take over the loan payments.

Down Payment

The down payment on your home will guarantee the lender that it will not lose money if you fail to pay your debt. The lender requires the mortgage to be less than the value of the house, so that the loan will be paid back if the house has to be sold. The down payment makes up the difference between the cost of the house, and the loan you can get to purchase it.

The Conventional Rate Mortgage

This is a mortgage with an interest rate that stays the same until the mortgage is paid off. The exact terms of repayment, and the specific interest rate available at any given time, is variable. You can call institutions to find out their interest rates, or I can do it for you. I can also help you calculate how much you can expect a bank to loan, given your personal financial picture.

The Adjustable Rate Mortgage (ARM)

An ARM is a loan with interest changing at different periods of time. The rate changes may be predetermined and fixed, or they may be based on variable factors, such as the one-year Treasury Security Index.

The FHA Loan

FHA loans are insured by the Federal Housing Administration. This makes this a very low risk loan for the lender. These loans are designed to encourage lenders to make loans for residential properties. The terms are also favorable for the buyer, and are worth consideration.

The VA Loan

These programs offer long-term financing to eligible veterans or their surviving unmarried spouses, with little or no down payment required. VA loans are guaranteed by the Veteran's Administration.