How to Buy a Cash Only House With a Loan

Buying a house with cash is becoming increasingly uncommon as home prices rise faster than incomes Most buyers finance their home purchase with a mortgage loan However, sellers often prefer cash offers since they allow for a faster, simpler transaction without financing contingencies. So how can you buy a cash-only home if you need a loan? There are a few clever ways to structure your offer like cash even if you’re not paying the full amount upfront.

Why Sellers Prefer Cash

With a cash purchase, the buyer has already proven they have enough funds to cover the sale price. This gives the seller confidence the deal will close smoothly. Cash offers also bypass issues that crop up with financed deals, like the buyer failing to qualify for a mortgage.

For sellers, cash deals mean:

• Faster timeline No waiting on bank approvals, so they can close faster. This appeals to sellers in a rush to move.

• Stronger buyer: Proof of funds eliminates worries over the buyer’s financials.

• Fewer contingencies: Cash buyers can waive financing and appraisal contingencies that put sales at risk.

• Higher offers: All-cash bids often exceed financed offers, since the buyer doesn’t need to borrow as much.

In competitive markets, cash reigns supreme. Sellers will readily accept a strong cash offer over a higher financed offer due to the certainty it provides.

Get a Mortgage Upfront

The most direct way to transform a financed purchase into a cash-like offer is to get fully approved for your mortgage beforehand through a process called upfront underwriting or “decision-now” approval.

Here’s how it works:

• You go through the entire mortgage application and approval process before making an offer.

• The lender thoroughly verifies your income, assets, and credit.

• Your loan is fully underwritten and approved, minus the appraisal.

• You receive a loan commitment letter to include with your offer.

This upfront approval provides near-certainty that your financing is secure. Since the lender has already vetted your mortgage application, you can waive financing contingencies. Your offer carries less risk than a typical financed deal.

Upfront underwriting streamlines the buying process. The seller can hand over the keys at closing just days after accepting your offer.

The catch? Not all lenders offer upfront approvals. Large banks shy away from them because of the work required. Smaller lenders and brokers are more likely to accommodate this service. Mortgage brokers can shop multiple lenders to find you the best fit.

Expect to pay a bit more in upfront costs like application fees and appraisal charges. But in a seller’s market, that peace of mind can help you clinch the winning bid.

Use a Cash Offer Company

Another option is to work with a company that purchases homes in cash on behalf of buyers. These “cash offer” companies essentially act as a temporary middleman in the transaction. Here’s how they work:

• You select the home you want and negotiate the purchase price with the seller.

• Instead of you making the offer, the company makes an all-cash offer directly to the seller.

• If accepted, the company buys the home in cash and takes ownership.

• You immediately secure financing to purchase the home from the company.

• At closing, the company transfers ownership to you once financing is in place. They pocket a service fee.

This approach transforms your financed purchase into a lightning-fast cash closing on the seller’s end. At the same time, you aren’t scrambling to get approved or fronting 100% of the cost upfront.

Companies like Ribbon, Homeward, and Accept.inc provide these cash offer services. Orchard also offers a unique cash offer product that lets you make a direct cash offer by pooling funds with other buyers.

The convenience comes at a price, though. You’ll pay closing costs and origination fees to the cash offer company, often amounting to 1-2% of the purchase price. Still, in hypercompetitive markets, it can be worth the premium.

Use a Portion of Cash

If you can pay for part of the home in cash, this can strengthen your offer too. Paying just 10-20% down shows sellers you have skin in the game while still allowing financing.

Including a “proof of funds” letter from your bank verifying available cash helps assure sellers you’re good for it.

Similarly, you could take out a smaller separate loan for a portion of the price. This avoids one huge mortgage. A common approach is pairing a traditional mortgage covering 70-80% of the price with a home equity loan or line of credit (HELOC) for the remainder.

While not as fast as 100% cash, this demonstrates you have financing lined up and cash set aside to cover gaps. That looks better to sellers than relying solely on a mortgage.

Remove Contingencies

If upfront underwriting or a cash offer company won’t work, you can still make your financed offer more appealing by removing contingencies.

Financing contingency – Waive this if you’re highly confident in your approval odds based on your credit, income and lender pre-approval. If financing falls through, you risk losing your earnest money.

Home sale contingency – If you need to sell a home first, consider waiving this contingency. Rent your home or line up temporary financing so you can move forward even if it doesn’t sell in time.

Home inspection contingency – Waiving this can be risky. Only do so if you’re extremely confident in the condition based on thorough inspections upfront.

Appraisal contingency – Agree to cover any appraisal gaps yourself by waiving this contingency.

While riskier, stripping away contingencies shows sellers you’re committed to ensuring the deal goes through.

Strategize Your Offer

Aside from making your offer resemble cash, a few other tips can help your bid stand out:

• Act quickly – Be ready to view homes and make offers promptly to edge out competing buyers.

• Bid competitively – Offer at or slightly above list price while still remaining within your budget. Don’t get caught overpaying in a bidding war.

• Put down a large earnest money deposit – Ponying up 2-5% or more shows sellers you have skin in the game early on.

• Shorten contingencies – Ask for 7 days rather than 14 to clear contingencies to speed things along.

• Cover closing costs – Offer to pay the seller’s typical closing costs like transfer taxes and attorney fees.

• Personalize your offer – Write a letter to the sellers explaining why you love the home.

• Use a local lender – Ask your real estate agent for lender referrals familiar with the area. Local lenders tend to close faster.

Partner with the Right Pros

Scoring a competitive offer requires coordination between your real estate agent and lender. Here are traits to look for when choosing your team:

Real Estate Agent

• Specializes in purchase transactions rather than listings

• Regularly represents buyers in multiple offer situations

• Responsive,available, and fast-acting

• Knowledgeable about local market conditions

• Strong negotiation skills to create winning offers

• Excellent relationships with local lenders and contractors

Loan Officer

• Extensive experience with financed purchase offers

• Provides rapid pre-approvals

• Offers upfront underwriting to qualified buyers

• Strong rapport with local real estate agents

• Able to close loans efficiently in as little as 15-20 days

• Keeps buyers up-to-date throughout the process

As a buyer in today’s market, having trusted pros in your corner is invaluable.

Final Thoughts

Coming to the table with a cash offer or cash-like terms significantly improves your chances, especially when bidding on a hot home. While few of us can afford to buy outright with cash, with the right lender and creative thinking, you can craft an offer that delivers cashlike speed and flexibility. This can be the competitive edge you need to land your dream home.