Buying cash or financing proof of funds

This question you have to ask yourself even before you start looking for a property, as there are a couple things that need to be considered:

Cash:

In todays market and most cases the seller is asking for a "proof of funds", to show him that you are actually capable of paying the offered amount. Without this certification of your financial strength the seller will not waste any time by looking at documents and not knowing whether you will be able to follow through with the purchase at all.

This proof of funds can be a simple account statement printed off the internet or can also be a bank confirmation about your credit standing. You can download a sample here "Proof of funds"

It is very important that you provide such a proof of funds before we start looking at  your selected listings. This way we will be flexible and can act quickly once you have found the right property.

Financing:

It is always a good decision to shop for the best mortgage loan for you. Depending on how much money for a down payment and closing cost you have available there are different loan programs available that could suit you. Whether it is a construction-perm loan, a conventional loan, an FHA or VA loan - you should get in touch with a bank or a mortgage broker to find out what would be the best way for you to go. If you have done your  mortgage application and sent in all necessary documents the bank is able to issue the so called "Preapproval". This preapproval is needed to submit a financing offer to a seller. With this document the seller can see that you have done the first step on the way to financing and that a bank has at least tentatively screened your financial situation, your income and expenses as well as your assets and debts. As mentioned before you should have this document in your pocket before you start looking for a home, condo or lot.

After the acceptance of the contract with the contingency of financing the bank will appraise the property, the home inspection will be done and during the course of the weeks thereafter the lender will do the detailled check of your financing application. It can still happen that the financing will fall through if the lender does not see enough security in the property or simply your financial situation might have changed or is not as it looked like at the beginning.  In case everything is alright and the bank will finance the purchase then the "preapproval" is going to be changed into a  "loan commitment" which is the final removal of the contingency in the contract. If the buyer decides to not follow through with the purchase now, he is at risk losing his escrow deposit.

The 28/36 Rule

The lender will calculate excatly that no more than 28% of your gross income will be applied to your mortgage, real estate taxes and insurance. Further no more than 36% of your gross income will be applied to your mortgage expenses and your regular debt expenses (car payments, credit cards, other loans, etc.).

If you can buy cash do it - For one thing we have a stronger position when it comes to the offer and the negotiation, for the other it saves you a lot of paperwork, additional expenses and uncertainty about whether the financing request will succeed.