Home, Land, Property Buying and Selling - Saving to buy house with cash

I have never heard of anyone (except for millionaires) buying a house with cash. I HATE owing money and have decided I am not going to buy a house again until I can pay cash for it. I am saving everything I can now and should have enough to buy a house in around 5-7 years depending on how expensive of a house I buy. My question is does anyone see a major flaw in this idea. I know that my credit history might look good with regular house payments but I don’t see why I need credit history since I don’t buy anything unless I can actually BUY it and not put it on credit (right now I have no dept). I am curious what others think of my plan so please respond.

Hi Joe,
Unfortunately Banks don't look at things the way we would want. They are looking for a credit HISTORY. If you pay as you go, the old fashioned way, they don't know how you will react when you become a typical american and owe a bunch of money, so you have to show them. And with the current low interest rates and low housing prices, now is not a bad time.

Anytime you can enter a buyers market and be in a position of not "having" to buy, you can get a really good deal. I don't recommend everyone get into "flipping houses" with all of the major renovations we see on the tube, but buying a small home to live in, making the cost effective improvements and then being patient while it sells for a good profit is good business. Unless they have changed it, the profits are tax free.

Maintain your current conservative thinking and put together a comfortable nest egg, but you don't have to have the full purchase price in the bank to start shopping.

Bud

Bud makes a good point, I think; in your quest to remain debt-free you could end up paying perhaps 50% more for the same amount of house in 5-7 years. With the market bottoming out, this would be a prime opportunity to get your feet wet. In 5-7 years from now, when the market will be better, the $100,000 house you could buy today may cost you $150,000. The 2 year old house across from us is on the market for about half what it would have sold for 3 or 4 years ago. Now the down side; if you have been paying cash for everything for a long time, as Bud mentions, your lack of credit history may be a stumbling block to getting a mortgage. I would be looking into all options at any rate and not moving ahead with blinders on.

Not sure where you live muthukumar, but there are houses and there are houses. In my energy auditing business and many years of general contracting, I have been in some really, really, nice small homes. If you are paying to live where you are, there are usually homes that can be purchased for less. Of course you have to be making a decent income as Joe stated, 5-7 years he could pay in cash.

One of the tricks in life is setting your lifestyle below your income. I personally know people who have made average working wages all of their lives and now after 40 years are worth many millions of dollars. I also know others who have made many millions and aren't worth 2-cents.

Owning a house right now is about as easy as it is going to be, assuming you qualify, but that doesn't mean everyone should run out and but one.

Bud

I agree that it makes sense to pay cash when you can but a house is a little different. Unless you are living with someone else footing the housing bill - you have to pay for a place to live. Because of this fact it almost always makes more sense to buy. Rent payments can go a long way towards paying off a mortgage.

Most of my credit history comes from credit cards. I make the majority of my purchaces with a credit card but I pay them off every month!

btw - I paid cash for my current home and I've never come close to being considered a millionaire. My previous home was a mobile home on a rural lot. Once I got it paid for, I kept making the payments [even increased them] but instead of giving the money to a mortgage company - I paid me:D

My situation is a little different. I am living overseas for the next couple of years with the navy so I won't be able to get a house now. But with the navy it is easy to save money because a pay raise comes every couple of years and the secret is to just save the pay raise. (Live on O-1 pay even though you are a higher paygrade.) I do like marksr does and buy everything with the credit card but pay it off before the end of the month. (I even paid for my last car that way). But it just seems like that if I can't buy a house for a couple of years by the time I am back in the states the money that I have saved up will be getting a grater return than what the rise in house prices will be.

Well, it took me a while to realize it, but buying a house however you do it, is about the best thing you can do.

Depending on where you plan to live, rents can run within a couple of hundred of a mortgage payment. And when you move from a rental you get squat for the money you paid. There's also no tax benefit to renting.

Now if you are staying in the Navy and plan to live in the Q or aboard ship..that might be a different matter.

As was stated though..there will still be some houses that will be deals in 2 yrs maybe, not so likely in 5-7 yrs.

It last sold in 05 for 48K,,, one bedroom ,garage securtiy system all appliances washer dyer included, ceiling fans all rooms , new roof and new siding fews years ago, just needed a little interior paint,,, being on disability, cousin came over painted the whole inside in one afternoon,,, got fenced in backyard quiet dead end street ,,, i'm on end got last lot so no neighbor on 3 sides,,, didn't have 7K,, uncle lent me 8K (cover closing and permits stuff) for 3 years @ 10%,,, so $258.00 for 3 years can't go wrong considering was renting paying $600.00 month just pissing the money away,,, figure after 3 years the economy should start to pick up,, have nice investment then,,,hell was offered 15K for it last week Beer 4U2