Buying a home with cash or with a mortgage

Should we buy a home with cash or with a mortgage.

Some financial experts say that shoppers should have 100 percent debt-free. No credit cards. No car loans. No debt of any kind for any reason.That might be a way of smart advice until the question of buying a home comes up. At that point, the debt free life can get to be a problem.

In 2014, just 5 percent of first-time homebuyers obtained a home without a mortgage, as per a review by the National Association of Realtors. Some beginners get their home as a blessing, so those outcomes recommend that even under 5 percent figured out how to set aside enough money to purchase a home out and out. That is not no one, but rather it’s a little cut of the aggregate populace of first-time purchasers.
Great credit can help you save thousands on your mortgage.

Paying with cash?


One of the financial expert, Dave Ramsey said that it will be the best method if paying cash for a home. Then There are Ramsey’s fans said that buying a home with cash is not a magic and it’s not easy. Buying a home with cash, not mortgage can be happened because homebuyers have hard work and discipline.

In reality, fans reported that they paid cash for and planned to do as below;
• Financing and paying off a starter home first.
• Building a home themselves and paying money for materials after some time.
• Saving and contributing for a long time before purchasing.
• Buying a $14,000 fixer-upper and doing the repair work themselves.
• Living in a relative’s home while they attempted to sufficiently spare to purchase.

You need credit to get credit


However, if the method of paying cash don’t work out for them, homebuyers have to encounter with the difficulty of getting a mortgage loan because they have never had credit at all. They don’t have bad credit but they have no credit, Neill said. “They’ve taken a Dave Ramsey course or done some other type of financial planning and the advice is, ‘Don’t pay credit cards, pay cash.’ That’s fantastic guidance until it’s time that you have to talk with the mortgage lender to get prequalified and they say, ‘It’s not an issue of you having a 500 credit rating. It’s an issue of you not having any credit at all.
Another article on Ramsey’s website acknowledges that his “100 Percent Down Plan” might be out of reach for some. In that case, homebuyers are advised to wait to get a mortgage until:
• They’re debt-free.
• They have at least three to six months of expenses in emergency savings.
• They have a down payment of at least 10 percent, and preferably 20 percent.
• If married, they’ve been hitched for at least a year.
“If you aren’t paying cash, get a fixed-rate mortgage for 15 years or less. Keep your payment low — no more than 25 percent of your take-home pay,” the article advises.
Moderation in credit
Financial planners, like Bob Morrison, a principal at Downing Street Wealth Management in Littleton, Colorado, say consumers should avoid overusing or underusing credit.
“Normally, (buying a home) requires credit, so establishing credit for that is very important,” Morrison says. “You don’t want to go crazy and buy things that aren’t within your means, but at the same time, using credit prudently is wise.”
Ronit Rogoszinski, wealth adviser for Arch Financial Group in Garden City, New York, says being “zeroed out or maxed out” with credit “doesn’t make sense either way.”
“You may be missing the opportunity to maybe buy a home that you can build equity in and maybe have as your legacy to your children,” Rogoszinski says. “The extremes just don’t work.”
2 credit score options
Homebuyers who don’t have credit or whose credit file is too thin to generate a credit score have two options, says Greg Cook, mortgage consultant at Platinum Home Mortgage in Temecula, California.
Alternative credit option
One option is to create an alternative credit history from other financial records, such as rent checks, insurance premiums and utility bills. This process is time-consuming and can take several months to complete, and Cook says not all lenders have the resources to do it.
What’s more, he says, the result “isn’t going to be a great score” because the alternative credit history won’t date back more than two or three years. That means the buyer will probably pay a higher interest rate for a home loan than someone who has a good traditional credit history.
Credit card option
The other option is to get a credit card, charge a modest sum and make at least the minimum payment for at least six months, the minimum time necessary to generate a FICO score.
The account must be undisputed and reported to the credit bureaus and cannot be associated with any account holder who has been reported as deceased, according to MyFICO.com.
“Unlike alternative credit, it is real credit,” Cook says. “If you have a six months’ history with two active trade lines and everything else is in order, you could very well get a (loan) approval.”
Cr. Bankrate.com

If possible, pay cash. If not, buy a home with a mortgage.

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