A cash offer on a house is a common way to buy a home without using any mortgage money. However, it can come with some stipulations, so buyers must be prepared to show that they have enough liquid funds to cover the purchase price and closing costs.
One of the first things a seller or real estate agent will want to see is your proof of funds (POF). The letter is usually signed from your bank on its letterhead and dated the day you are making an offer, showing that your money is in your account as of the time you are presenting it to them.
Your proof of funds must be in a liquid asset, which means the funds must be available to you right now, or they must be able to be quickly liquidated should an emergency arise. A major portion of the liquid funds must be in the form of cash, but it is not uncommon for other types of assets to qualify as well.
For example, a stock portfolio may qualify if it is in an easily accessible form of currency. It should be noted, though, that a stock portfolio can fluctuate in value based on market conditions. This can make it difficult to provide your seller with a reliable estimate of how much you have in your stocks at any given time. Learn more https://www.companiesthatbuyhouses.co/new-jersey/home-buying-company-edison-nj/
Another type of proof of funds that can be used is a 401k or IRA. These can be withdrawn for a down payment, but the buyer must be aware of penalties associated with early withdrawals and the fact that they may not be able to use those funds to close the sale of the home.
Getting pre-approved for a mortgage loan will allow you to show your proof of funds to any potential lenders. It will also help you avoid some of the stipulations that might be applied to a cash offer, such as appraisal and mortgage financing.
The downside to a cash offer is that it can be difficult to find a lender willing to approve it. The mortgage company will need to perform a number of different checks to verify your financial history and credit score, so it can be more difficult than a traditional loan.
A mortgage pre-approval will also reassure sellers that you’re a serious and qualified homebuyer, and it will help them weed out any offers that might not be worth considering. This is especially important if you’re making an offer in a very competitive market. Read more https://www.ibuyers7.com/new-jersey/ibuyer-edison-nj/
Your proof of funds must be sufficient to cover the entire purchase price and closing costs, so make sure you have enough of that money in an available account before you submit your offer. Your real estate agent can advise you on what kinds of funds are acceptable and how soon to request a POF from your bank.
If you’re a first-time homebuyer, you can get a free proof of funds from your bank. It will take a few days to receive the letter, but you can start the process sooner than you might think.