What's Better: Buying a House with Cash vs Mortgage?

If you've been looking at homebuying in the past few years, you know firsthand that great houses are getting snapped off the market in a matter of days, and sellers often have had multiple offers to choose from.

Submitting the best offer in a seller's market can be challenging if you're stuck with traditional financing. And even in a buyer's market, you need to be leery of overpaying. But whether it’s a buyer’s market or seller’s market, there's one thing that can set your offer apart and be a win-win for both parties.

The answer is: a cash offer.

So, when can and should you consider buying with a mortgage vs cash? What are the differences between financed and cash offers? And is it possible to buy a house with cash and then secure a mortgage on the house afterwards?

Here's what you need to know about the pros and cons of mortgages vs cash.

Buying a house with a loan vs. cash

Mortgages are the common way for Americans to pursue the American Dream of homeownership for a reason. For a long time now, they have been the only way for the vast majority of homeowners to be able to afford a house because most people can't afford to buy their first home with savings alone. A home loan allows them to make payments over time.

Here are other reasons why mortgages are popular:

• When mortgage rates are low, like they are now, they are considered cheap money. The cost of borrowing is low compared to the benefits of owning a house faster.

• Buyers can build home equity without having to pay in full upfront.

• Spreading the cost of the home over 15 or 30 years into affordable monthly payments frees up money to budget elsewhere (including investing in other areas, like retirement plans or emergency funds).

• Making consistent payments on a real estate asset is a great way to build credit.

• There are tax-related benefits to a mortgage.

So why wouldn't you want to buy a house with a mortgage?

• Some people want to avoid debt no matter what.

• Some people cannot qualify for a mortgage, for various reasons.

• But perhaps the biggest issue working against mortgages in the "cash vs. mortgage" debate is that 21% of deals that are delayed or fall through due to “issues related to obtaining financing,” according to the National Association of Realtors. Home sellers prefer cash offers because they're less likely to fall through. In other words, if your offer includes a financing contingency, your offer might be rejected if a competing offer doesn't.

Cash offers are more attractive to sellers, but why? And what can you do if you don't have enough liquid to pay for a house with cash?

Don’t take the pre-approval bait

Many first-time homebuyers assume that their financing is secured if they get a pre-approval letter from their lender. But that's not usually the case.

When taking the traditional mortgage route, you’ll provide a loan officer with some simple, surface-level documentation, including your credit report, proof of income and any assets or debts you may have.

And...voila! In as little as 24 hours, you’ll receive a pre-approval letter stating you’ve qualified for a certain loan amount; BUT with one caveat — with a traditional lender, that letter is not a commitment that you’ll actually receive the loan.

A pre-approval gets you in the door to make an offer, but the actual approval process — in traditional underwriting — doesn't begin until the house goes under contract and the underwriting process is initiated. For sellers, agreeing to an offer in this scenario is pretty risky, as a pre-approval doesn’t provide proof that you’ve secured the financing needed to purchase the home.

Once your offer is accepted, a traditional mortgage lender will move you into underwriting. A lot can happen between the time you’re pre-approved and finally receiving the green light from your lender. An underwriter will perform a thorough assessment of your finances, and if you’re unable to meet certain requirements or your financial picture changes, your loan could be rejected.

Keep in mind, this can happen mere days before you expect to sign the final paperwork — meaning both you and the seller have already invested in inspections, appraisals and more. Imagine thinking it’s a done deal? Your offer won. You were already envisioning yourself inside the home. And...poof! Just like that, everything falls apart. Even the seller and their real estate agent have to start back at square one when financing falls through.

Why is a cash offer better than a mortgage?

Everyone’s heard the saying, “cash is king.” But, when it comes to a real estate transaction, what the phrase really means is: cash equals certainty. Nothing makes an offer sizzle like proof of funds from day one.

Where a pre-approval says, “There will probably be money in the bank a month from now,” proof of funds is actual money in the bank — showing the seller you have the cash to back up your offer.

Sellers look for cash offers because they remove uncertainty from the equation. As a homebuyer in a hot real estate market, cash is the key to making your offer stand out from the crowd and winning your dream home. Plus, it puts more negotiation power in your hands.

According to national statistics, a cash offer is four times more likely to win in a multiple offer situation over a traditional mortgage offer. What’s more, all-cash sales, which now account for 36% of the housing market, are highly attractive for both buyers and sellers because they speed up the closing timeline.

What takes traditional mortgage lenders an average of 47 days to complete, can take 14 days or fewer with cash.

But the big question remains: how does the average homebuyer afford to make an all-cash offer? And even if you had cash in the bank to put down 100% of the selling price, what about all those advantages to a mortgage we talked about earlier?

It turns out that everyday homebuyers can buy a house with cash while still getting all the advantages of a mortgage.

Here's how it's possible to make a cash offer with a mortgage

Homebuyers now have the opportunity to secure the funds needed to make an all-cash offer on a home, backed by an Accept.inc mortgage.

Accept.inc was founded on the belief that anyone who qualifies for a mortgage deserves an equal shot at winning — a belief that the best homes, school districts, and neighborhoods shouldn’t be reserved exclusively for buyers who have hundreds of thousands or millions of dollars in their bank accounts.

We take the traditional mortgage process and flip it on its head, performing all the underwriting upfront. Yes, you can get a pre-approval quickly to immediately begin the house hunt in earnest, but the magic begins right after with our Cash Approval process. Our Cash Approval can be completed in as little as 72 hours and provides borrowers with the ability to shop the market with both confidence and cash in their pocket. Knowing your home-buying power is guaranteed on day 1, not day 31, is a complete game-changer.

And this isn't delayed financing, where a buyer still has to have all the cash up front to buy the home on their own. In that scenario, the buyer brings their own cash to the table, and then gets a loan against the home afterwards, with some risk and potentially less favorable rates. With an Accept.inc loan, you buy the house with our cash and pay it back over time through a mortgage.

You no longer need to decide whether you should buy a house with cash or a mortgage. Now you can have your cake and eat it too.

By becoming Cash Approved™, you’ll be able to submit an offer with 100% certainty that the cash will be available at closing AND you can pay back the borrowed funds over time just like a normal home loan.

Getting started is easy, and it doesn’t require any additional costs or fees. We offer competitive rates and can improve your chances of scoring your perfect home by 4X.

To get the ball rolling, simply begin the Cash Approval process with this simple form.