The Aplikowski Team at RE/MAX is affiliated with good quality lenders and mortgage brokers who can go over your financing options with you so that you are prepared to make a strong offer when you find the house you want.

 

Whenever you’re shopping for a house – whether you plan on living in it or using it as an investment property – you can usually get a better price when you have cash in hand. Why? Three reasons:

•           A bird in the hand is worth a half dozen in the bush. Smart homeowners would rather sell to someone who is more likely to close on the deal rather than a buyer who might not be able to secure financing. This gives the sellers confidence to move forward with their purchase.

•           Distressed homeowners may need to sell in a hurry. With cash, you can buy in a hurry, without having to wait for a lender to approve your loan.

•           If you want to bid on a property at a foreclosure sale, you will need a certified check for the opening bid amount or at least enough to cover the deposit (usually about 10 percent). You have very little time to come up with the rest of the money – hours or days, not weeks or months.

 

Having "cash in hand" means having the cash sitting in your bank account, but you can have the equivalent of "cash in hand" by lining up your financing in advance. For example, you can have any of the following financing already in place:

•           Home equity line of credit: With a home equity line of credit, a lender allows you to borrow against the equity in your home. For example, if your home is worth $200,000, and you owe $80,000 on it, you may open a home equity line of credit for $100,000. The bank provides you with a check book for your home equity line of credit account, so you can make payments out of that account. You pay interest only on the money you borrow.

•           Hard money loan: These are usually high-cost loans: points (interest paid up front) and high interest. Hard money loans are often useful for investors who plan to flip (rehab and sell the property quickly). In most cases, hard money lenders allow you to borrow against the future value of the home. Talk to your mortgage broker about hard money loans.

•           Pre-approved financing: A lender can provide you with a pre-approval letter, essentially stating that based on your income, assets, liability, credit history, and other financial records, you are qualified to borrow X amount of money.

Don’t confuse pre-qualification with pre-approval. If a lender pre-qualifies you for a loan, the lender is saying that based on the information you provided, you will probably be approved for a loan. Pre-approval indicates that the lender has examined your financial records and has determined that it will approve a loan up to X amount of money. Pre-approval is like having cash in hand. To provide final approval, all the lender needs to do is determine whether the value of the collateral (the appraised value of the property) is sufficient to cover the amount of the loan.

Remember, in the real estate business, money talks – and buyers with cash in hand are the buyers who get the best deals.

Ralph R. Roberts, GRI, CRS is an experienced real estate agent and investor and author of Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons).