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Hi All! We have enough money to purchase a house with cash (in the area we are moving to), but we don't want to put all our eggs in one basket, so would prefer to put 50% down.
Question is... Is it better to qualify for a loan to purchase (rates, loan costs, etc) or to purchase the house with cash, then do a cash out refi?
I tried looking on Bank Rate for rates and it looks like it would be the same, but I seem to remember that cash out refi's cost more.
Unless you feel that you can get a significant discount by making a cash purchase, I'd opt to finance the purchase--primarily because it gives you more certainty as to the rates, loan costs and the amount that you can borrow.
With 50% LTV, you shouldn't be paying a cash out premium in your rate (60% is the typical benchmark).
That said, you are better protected with a purchase loan, in that you have a financing contingency and an appraisal contingency. Alternately, with a cash purchase, you could drive a better bargain if you waive both financing and appraisal clauses.
A rule of thumb, it's far easier to get the loan when purchasing, than getting cash out post-closing.
With 50% LTV, you shouldn't be paying a cash out premium in your rate (60% is the typical benchmark).
That said, you are better protected with a purchase loan, in that you have a financing contingency and an appraisal contingency. Alternately, with a cash purchase, you could drive a better bargain if you waive both financing and appraisal clauses.
A rule of thumb, it's far easier to get the loan when purchasing, than getting cash out post-closing.
Thank you, everyone, for the thoughtful responses. We are putting that much down, because we are trying to get our monthly mortgage payment to a very comfortable level, since are taking a cut in pay to move to the area (lower cost of living). That way if there are any sudden job changes, we won't have any problems making our payments. Also, while house values could go down, the stock market could also experience a correction that would drop the value of the money in there. It just feels safest to have some money to invest and some to help us get a nice house with a small enough mortgage payment.
Any chance of increasing the number of years on the loan (ie. if you are looking at a 15 year loan have you considered a 30 year loan instead)? Rates are still low and I would be looking to get the longest terms I could as long as the interest rate remained low. Make sure there is no prepayment penalty and then you can pay it off when you choose.
Make all cash offer and then get a loan when your offer is accepted.
In my state you would need to disclose on the contract how you are paying. If you change it after the contract, the contract has to be changed, which gives the chance the sellers won't agree.
OP- As already said, it is way easier to get the loan and pay all transfer taxes at the time of purchase than after the fact.
In my state you would need to disclose on the contract how you are paying. If you change it after the contract, the contract has to be changed, which gives the chance the sellers won't agree.
OP- As already said, it is way easier to get the loan and pay all transfer taxes at the time of purchase than after the fact.
I think most contracts now allow for the borrower to change how to pay for the property, as long as there is no net effect on the seller.
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Why didn't I think of that
