Author Topic: Questions about Buying a Home with Cash  (Read 650 times)

Mr. Freedom

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Questions about Buying a Home with Cash
« on: February 03, 2019, 03:45:43 PM »
We are looking to downsize from our current home to reduce our ongoing housing costs, have less house to maintain inside and out and to eliminate the remaining balance on our mortgage.  Our equity in the home in close to 70% of the likely sale price based on a comparable property across the street that recently sold and we did have an initial discussion with a realtor.  I just received a significant inheritance so I currently have 70% of the cash on hand to cover the cost of a new house weíre interested in that just went on the market today.  My father is willing to loan to me cash to cover the balance of the cost of the home which I would then pay him back with interest after I sell my current home.  This would avoid me having to get interim financing for buying a new home and my intent is to no longer have a mortgage regardless.  In other words, if I was in a position where I needed to get a mortgage to buy the new home I would have paid that off entirely with the equity freed up from the eventual sale of my existing home.

A sibling had recently taken a loan from my father which my sibling is now ready to pay him back the principal with interest.  Iíve communicated to my family my desire to borrow the same amount of money from my father that my sibling has and my sibling proposed writing a check directly to me as a transfer of the loan from my father to me.  Iíve got a couple questions on this:

Is there potentially any issue with this loan from my father being transferred directly to me from a sibling?  It remains a loan from my father but I will not have received the money from my father but from my sibling instead.  Is there a certain way this should be recorded so it doesn't look like it was gifted from the family? 

Iíve never bought a home with cash before.  Is there anything Iíll have to do to get financially ďpre-approvedí as a credible buyer when I go for a showing for the house we're interested in?  Iíve heard something about getting a statement from your bank that verifies your balance or something like that.  Will it be an issue that this money was recently deposited in my checking account (both the inheritance and the loan from my father)?

Any information, insight or anything else I might be missing on this situation that anyone could share would be greatly appreciated.

Thanks. 

lhamo

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Re: Questions about Buying a Home with Cash
« Reply #1 on: February 03, 2019, 06:28:09 PM »
We made a cash offer on our home a couple of years ago -- and yes, we had to provide a letter from our bank verifying the balance was sufficient to support the offer.  We had only recently deposited most of the funds, which were from an overseas property sale.

Many years ago we made an offer on a co-op in NYC.  When we applied for the mortgage, we had to provide bank statements for several months and provide a separate letter from my sister, who had gifted me a large cash sum, to confirm that money was a gift and not a loan.  Only had to provide those documents to the mortgage provider, though -- not to the co-op (they saw our financials but did not request the gift letter).

tralfamadorian

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Re: Questions about Buying a Home with Cash
« Reply #2 on: February 03, 2019, 06:45:34 PM »
Iíve never bought a home with cash before.  Is there anything Iíll have to do to get financially ďpre-approvedí as a credible buyer when I go for a showing for the house we're interested in?

It depends on the strength of the market. I purchased a property with cash in 2012 and no additional information was requested. Today lots of markets are still strong enough that you will need to show a bank statement.

Mr. Freedom

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Re: Questions about Buying a Home with Cash
« Reply #3 on: February 03, 2019, 08:10:41 PM »
Thank you both for your input.  I hope this current market will only require a verification letter from the bank about the funds in my account being able to cover the purchase of the home.  We'll see.   

Fishindude

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Re: Questions about Buying a Home with Cash
« Reply #4 on: February 04, 2019, 08:35:41 AM »
I've bought several properties cash and have never been questioned if I had deep enough pockets to really go through with the deal.   That's why you put down some earnest money.  If something falls through on your end, they keep your earnest money.

I would advise against even short term borrowing with family.  If you're in as good of financial shape on this deal as you say, you should have no problem getting a short term line of credit from a bank.   Keep family and money separate.

Mississippi Mudstache

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Re: Questions about Buying a Home with Cash
« Reply #5 on: February 04, 2019, 10:15:57 AM »
I would advise against even short term borrowing with family.  If you're in as good of financial shape on this deal as you say, you should have no problem getting a short term line of credit from a bank.   Keep family and money separate.

And I would suggest that it depends on the family dynamics. I've borrowed money from my parents and grandparents on several occasions to buy vehicles. I was happy to avoid taking out a bank loan, and they were happy to receive better interest rates on my loans than they could have gotten from bonds or CDs. Worked out great. Not every family operates this way. I generally trust random people on the internet to know their own families better than I do.