The old adage “cash is king” can certainly hold true when it comes to home buying. However, your investment might be safer and more productive if you take out a mortgage instead. You need to decide which way will give you the biggest bang for your buck.

Paying Cash for Your Home

• Paying with cash can put you in a better negotiating position, especially in a seller’s market. If you are up against competing buyers for the same property, your cash offer could be very appealing to the seller. Risks to the seller are far lower in accepting your offer and closing is much quicker when you don’t have to wait for a lender to approve a loan.
• Your cash purchase will eliminate some requirements that come with a mortgage, such as title insurance, appraisal fees, and closing costs.  It alleviates the seller’s concern that a buyer’s loan application could be denied. In that case, the buyer is forced to start all over with the sale — every seller’s nightmare.
• In addition to benefits for the seller, a cash purchase may also create a discount for you. The seller may be open to reducing the price a bit in exchange for the speed of a cash sale. They understand that the quicker the sale, the faster they can invest or use their money elsewhere.
• If you have a low credit score, that won’t stop you from buying a home with cash. You can avoid the hassle of providing the multiple documents required by a lender, which can slow down the process.
• You can avoid sleepless nights worrying about a big monthly mortgage payment hanging over you for years to come. Your monthly household expenses will reduce dramatically when your housing budget only needs to cover insurance, taxes, and maintenance.
• Achieving financial peace of mind is especially true if you are nearing retirement age. Although many Americans retire with years left on their mortgage, it is a bonus if you can stop working without that debt.

What Are the Drawbacks to a Cash Sale

• Tying up all your money in your home reduces your liquidity. You need to have cash available for unexpected expenses, whether it’s a cracked foundation or a medical emergency. If you should lose your income, you need enough cash to keep you afloat for a few months while looking for a new job.
• Mortgage rates are very low currently, making a mortgage loan a cheap investment. If you can put 20 percent down, you will have more room to maneuver financially and pay less than four percent in interest.
• Your money will likely perform better for you if you choose to help it grow by diversifying. Putting all your funds in one place, including your home, is a big risk. The stock market, mutual funds, or other investments are ways to grow your wealth beyond just building equity in your home. Although you may think you will save if you eliminate mortgage interest, the money might actually earn more if you put the cash to work elsewhere.
• Mortgage interest is one of the few remaining tax breaks. The higher your tax bracket, the more valuable this deduction will be for you.

As you probably expect, only a minority of housing purchases in the U.S. are made with cash. Yes, there are advantages, but do you want to have so much of your liquid assets tied up in your home? Your real estate agent and your financial advisors are excellent counselors to help you make your decision.

There are many of us who dream of owning an older home, full of charm and personality. We imagine gorgeous woodwork, wrap-around porches, arched doorways, ornate fireplaces and sweeping carved staircases. All those hopes may come true, but be careful to evaluate the work and expense that can go along with owning an old house.

Talk to your real estate agent about getting a very thorough inspection. Some experts even recommend two inspections for an older property because there can be so many hidden problems. You want to be in a position to negotiate repairs in case significant or dangerous problems are discovered. Here are some possible pitfalls to anticipate.

Foundation and Structural Issues

Even meticulously built homes can shift over time, causing cracks in foundations and walls. Doors and windows may jam; chimneys may need realignment and stonework might need attention. Moisture creeping in over time can cause dry rot or corrosion, which can lead to mold or mildew. Old homes have a high risk of termite damage which can devastate floors, structural supports and drywall. All these repairs can be extremely expensive and homeowners insurance likely will not cover the cost.

Hazardous Materials

If the house was built before 1978, it likely contains lead paint inside and out. Professional paint removers can be hired if you are uncomfortable living with lead paint, especially if you have young children. Old lead pipes pose another issue. A water filtration system for the entire house or at least the kitchen faucet is the most cost-effective fix, but you might be faced with replacing all your pipes.

Asbestos was commonly used in insulation and fireproofing material until the mid-1970’s. Old popcorn ceilings probably contain asbestos, too. Removal costs vary greatly depending on the size of the project. If you are planning to remodel, asbestos removal is recommended.

Unsafe Electrical System

Find out the age of the home’s electrical system. If it is still the original knob-and-tube wiring, you should get a quote to replace it. Insulation for the wiring needs to be intact and the electrical panel and circuit breakers should be up-to-date. If the original wiring has already been replaced, it must be up to code to be safe and efficient. Check for code with updated plumbing as well.

Old Appliances and Mechanics

Kitchen and laundry room appliances, air conditioning systems, furnaces and water heaters all have an expected lifespan. Check the age of every unit to determine how much longer it should be operational so you can create a reasonable replacement schedule. Figure that into your household budget for the coming years if you decide to purchase the home.

Trees, Leaves and Roots

The beauty of a long-established neighborhood is usually a big plus when buying an older home. Towering trees and mature flowering shrubbery have great appeal, but keep in mind the price that comes with them. Trees need to be trimmed regularly or you risk dramatic problems when they are covered with ice in the winter. Autumn brings bushels of leaves to be removed. Old, tall trees have long roots that can crack foundations and sidewalks or grow into plumbing systems. All of this is costly.

Good News

The caution here is simply to be aware of hidden costs when you find your perfect antique dream house. There are plenty of excellent reasons to buy. Older homes are frequently in wonderful locations close to downtown cores. You are likely to find a long-established, close-knit community with lots of history. There is a good possibility that you will find craftsman-quality construction in the architectural features you admire. You also have a good chance for building equity with a strong long-term investment, if the upkeep isn’t too steep. Old houses are in limited supply and if you have a gem in a desired part of town, it will likely always be in demand when you decide to sell.

There are advantages to choosing a closing date either close to the first or close to the last of the month. Whether you are the buyer or the seller, you have a vested interest in the closing date working for you. The date is negotiable until the contract offered by the buyer is accepted by the seller. From that point on, all efforts must be made to ensure the date is met. If you don’t close on time, you can complicate your move and risk losing the house.

As a buyer, you need to give yourself plenty of time to work out details with your lender. Most people set a closing date 30 to 45 days after the offer is accepted. A home purchase has many moving pieces and there’s always a risk that more time will be required than you think. For example, the lender may ask for additional documentation as part of the loan process. Unless you are paying cash, you don’t want a quick closing date.

Frequently, it is wise to choose a closing date near the end of the month. Interest is prorated from the date you close to the last day of the month, so you will pay less if you close near the 30th. For example, if you close on July 10, you will have to pay 21 days of interest. If you close on July 25, you only pay six days of interest result in a savings of several hundred dollars due at time of closing.

However, there are certain advantages to closing early in the month. While you will indeed pay more in pre-paid interest, you won’t have a house payment for nearly two months. This may be your best choice when considering cash flow during your move. Loan interest is paid in arrears and your pre-paid interest will cover to the end of the month. If you close in early July, for example, you won’t have a house payment due for August until the first of September. Also, because many people choose the end of the month for their closing, it is the busiest time for mortgage brokers. If the lender has a backlog, the closing could be delayed.

You will establish an occupancy date as well as a closing date. At closing, you will assume ownership of your new home. However, the actual move-in date may occur later depending on your circumstances. Sometimes the sellers have already vacated the property or will move out immediately upon closing. Others may request an extended occupancy due to the move-in date of their next home and will then pay rent to you as the new home owners until they are gone. Also, you may choose to do some renovation work on your new home before moving in and will plan on a later occupancy date. Of course, your plans will need to coordinate with the move-out date of the property where you currently live.

One last tip:  avoid the holiday rush. If you are planning to make your move over a holiday, such as the four-day Thanksgiving weekend, don’t schedule your closing date for the Wednesday before Thanksgiving. Back it up to the Monday prior so that any glitches that might arise won’t derail your long-weekend moving plans.

Throughout the closing process, your real estate agent will guide you in planning dates and avoiding pitfalls. Lean on their expertise and you’ll be living in your new dream home before you know it!