Monday, February 29, 2016

How to Buy a House for Cash

This Money Monday we are going to learn How to Buy a House For Cash.

Buying a house is part of the American dream. Many couples rush into this decision before they are ready, fueled by insistence  from family and friends. Home ownership can be a great blessing but only if you are ready to own a home and you don't get into the ill advised situation where the home owns you.

Let's ask the following questions to determine if you are ready to buy a home.
  1. Do you have 3 to 6 months living expenses in an emergency fund.
  2. Are you out of consumer debt? Student loans, cars, bank loans, and credit cards.
  3. Have you saved for a significant down payment
If all of the above have been accomplished then you are ready to move ahead with home ownership.

The title of this article is "How to Buy a House for Cash". This is a special case where you have saved 100 percent for a down payment. 

Lets look at how this can be done.
  1. First you must believe this can be done. It can and there are some very good examples of young people doing it. Pray about it and set a goal as a single or couple to achieve this goal. 
  2. Pray especially about contentment. An attitude of contentment is one of your biggest assets in establishing a lifestyle well below your income. That is the main principle to paying cash.
  3. Second you must eliminate all other debt. and even better, never go into debt in the first place. Student loans, car loans and credit cards will block you from achieving this goal, stay away from them. You can go to college debt free, see our post on this.
  4. Save, save, and save some more. Some start this saving for a house in their late teens or early 20s, while they are still single and may not even be dating anyone. (Imagine how cool it would be if two like minded individuals joined forces in marriage, having set this goal in their late teens. Having 10 years of savings to make it happen. What if you saved $10,000 to $15,000 per year for 10 years. Starts to look pretty sweet.) 
  5. But Brian, this is impossible, no body does this. True it is some what rare, but only because people go crazy on lifestyle purchases. What if you decided to drive a good used car, forgo TV and cable (or other optional things in your budget), purpose to have no credit cards and pay as you go for college (that means pay cash).
  6. It may take 7-10 years to build up enough savings. Two incomes from a married couple really help with this. Try to save one whole income or even more. What if your goal was to rent initially and then pay cash for a modest house when you were 30. It can be done.
  7. Your first house will need to be modest in price. Definitely a starter home or maybe a fixer upper. That is OK. It will be all yours and you can set your goals for paying cash for your second home as your family grows and you might need more room. Don't believe the real estate hype and overbuy. If your realtor won't work with you on this or trys to talk you into buying too much, because you can "afford it", get another realtor.
  8. Give yourself 2 years to find that first home. Get posted on the market, but don't be in a rush. House fever is not your friend.  Even in a sellers market there are bargains out there. There are certain times of the year like winter when demand is down and sellers are motivated. It took three years to find the home we currently live in. 
  9. When you have saved enough to buy your first home, keep on saving. Pay yourself a mortgage for the next 5-7 years, so you can move up to your next home with cash when the time is right. If you bought a fixer upper. When it comes time to selL you will likely have some additional equity because of the improvements you made.
  10. You can do this several times as needed.
  11. Know that you maybe criticized for not buying sooner or bigger. That is OK, family and friends will soon be asking just how you did it.

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