Home Buying Tip - Cash vs. Financing

In the current market, cash is truly king. In fact, it is more than king. It is Ruler of the Universe. The force behind the cash is our financial system. Banks stuck with several million foreclosed homes and homes to be foreclosed are the culprits. And it is a double edged sword for home buyers.

Banks Closed for Business - The same banks that were racing to finance overpriced homes just a few years ago are now essentially "closed for business." A few years ago they were giving buyers 100% financing, even though the buyer was not required to provide any documentation to support their income or financial condition. Today, even very qualified buyers are finding it difficult, if not impossible to get a mortgage. You see, even when a bank decides to make the loan, they take so long to approve the loan, that the property the buyer was interested in, is no longer on the market.

By the way, the same banks that created the mess we're in are the very banks our government rewarded with billions of dollars in the ongoing Bailout. They were supposed to be using that money to free up the credit system and make loans. Instead, they have taken that money and used it to gamble in the stock market . . . with our money. Companies like Goldman Sachs and JP Morgan have made billions of dollars trading stocks . . . not making loans. So what have we done. We've turned our bankers in to gamblers with a twist . . . heads they win - tails you lose.

Bankers Making it Worse - Instead of loan modifications, banksters are foreclosing on homes and then trying to liquidate them. But here's the twist. They are not willing to finance these homes. In many cases, they are not willing to finance these homes under any conditions. That means the cash buyers are King. We have seen cash buyers pick up homes at 20% below offers made by buyers that required financing. The banks don't even want to wait a few days to determine if the buyer will qualify for an FHA loan. Instead, they want to dump for cash . . . and this drives prices lower.

What You Can Do - It would be great if we could simply vote Congress out and take back control of our government, then put the banksters in jail. Unfortunately, that is just a dream.

If you can't come up with cash, make sure your offer is not based upon financing. To do this you must get pre-approved for a mortgage based on your actual financial condition, and you must be sure the home you are buying will appraise for the value you are paying. With these two elements addressed, you should be able to write an offer with no financing contingency.

Now your offer is as close to cash as it gets for the bankster looking at the offers. You should also be prepared to put down as much as possible, and waive any right to get your deposit back if by some odd chance your financing falls through. This sounds risky, but it's not. I'll explain why tomorrow . . .

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