You also have alot more power to dictate terms since you are in posession of sufficent assets to buy outright. A friend of mine who runs about 20 rentals has walked on several house purchases because the seller didn’t meet one of her deadlines. The sellers are usually floored because they are used to dealing with mortage companies who take weeks or months to go through the process and will just hold up the process until promised work is done. The same process for her consists of pulling out her checkbook.
I reviewed what I believe is the appropriate statute, and while my assertion that there is a substantial element of secrecy is supported, my assertion that there is secret government regulation as to exactly what is reportable is not supported.
You will note in the below statute that banks are not allowed to discuss their filing reports about their customers with their customers.
I will note that I did observe a conversation along those lines on the forum “bankersonline.com”, but I may have misinterpreted it.
The Office of the Controller of the Currency hosts the following:
http://www.occ.treas.gov/fr/cfrparts/12CFR21.htm
As far as “secret” things that banks have placed upon them by regulators, there is a list of persons who you aren’t allowed to do business with. Banks apparently aren’t allowed to tell consumers if they’re on this list, colloquially referred to as “the OFAC list”.
Although I don’t know much about this issue, I’d have to agree with others in that you should be able to document the cash as thoroughly as possible because I’m sure the IRS and the DEA will ask a lot of interesting questions.
Your question makes sense. It is not necessary for the mortgage to be from a commercial source for a mortgage to be a purchase mortgage or home equity mortgage for which all or part of the interest payments may be deductable on your personal residence. I recently set up a purchase where the financing was issued by a family trust where the property owner’s interest payments to the trust would be tax deductible, provided the applicable reporting requirements were complied with. Likewise, you could get financing from a friend for the purchase. However, before you enter into such an arrangement, you should consult with your own legal and tax advisors because there are significant pitfalls if you do not do it correctly.
As a general matter, folks should make a distinction between paying with “cash” (i.e. demand deposits in a bank account from which you can issue personal or certified checks) and “currency” (i.e. those green rectangular bits of paper with engravings of dead presidents on them).
No reasonable seller of real estate would have any problem with accepting an all “cash” transaction (i.e. receiving certified checks, bank checks or wire transfers from the seller’s bank account for the purchase and not having any portion paid by a bank or other financing source). There is no problem or particular reporting requirement for sales for cash paid through the banking system (except for the general requirements to issue a 1099 or equivalent form that arise for all real estate transactions).
However, most sellers would have a problem with receiving large sums of currency (i.e. suitcases of twenties), both because of the reporting requirements for large currency transactions and because of the security, counting, counterfeiting, and similar problems that result from handling large sums of currency.
Unfortunately, the law allows them to seize your cash and property first, and then ask the questions.
If you do this, make sure that your friend provides you (and the IRS) with a Form 1098 at the end of the year showing the amount of interest you paid, or you may have a difficult time declaring it on your taxes.
The SDPD once detained me for the suspicious act of walking down the street eating a Kit Kat bar. I wouldn’t put anything past 'em.
I filed a request under the rarely-applied " E-Z FOIAL " statues and have obtained a digital image of the Evidence In Question.
Serves you right !!!
I think we’re getting into a big Hijack here. From vetbridge 's posts, it sounds like he is planning to pay with a big old cassiers check drawn from some financial institution- as opposed to getting a Loan/mortgage. This is just fine. Go ahead. There are some tax benefits to having a Mortgage, but it’s entirely your choice.
That is what the Op and this thread seems to be about.
This next is the "hijack’ part.
Now- that is opposed to him walking up and trying to buy a house with a breifcase of benjamins. The seller would rightly be suspicious, and you’d cause them problems. The IRS or FinCen would want to know where those greenbacks came from, as the seller would have to report that much cash on a from 8300 or a CTR.
There is no law against cash hoarding.
It is an interesting discussion, but it doesn’t seem to be “on point” here- that doesn’t seem to be what the OP meant by “cash”. OK?
<hijack>Fear Itself, did you ever run a MUD based on the Alien vs Predator series?</hijack>
These are not the droids you are looking for. You can go about your business. Move along.
My .02 thought here is that if your housing prices are rising like they are around here, you could be wasting money in paying for the house in full. You should be able to get a loan if you’ll put 25% down. The bank is almost guaranteed to be able to recoup its losses if you default.
Now what you’ve done is essentially borrow money from yourself. Your house is making money faster than you’re paying for it (assuming they’re rising faster than inflation), and you’re not tying up actual cash. That cash is able to be invested somewhere else, allowing you to make money two ways.
That is where I stand at this point (thanks in part to information derived from this thread:D). My realtor tells me I have been “pre-approved” for a mortgage of $X. Anyone know what this means?
This means that, when you make an offer on a house, you will have leverage over those who do not have a pre-approved loan. You don’t have to go through the process of finding a way to finance the house, and that’s one less contingency on the sales contract that the seller needs to worry about. All else being equal, you will have an advantage over other buyers without a pre-approved loan. Around where I live, unless you have a pre-approved loan, you can’t even make an offer on new developments.
But I haven’t spoken to the bank yet. Is the realtor saying that in their experience I should be able to get a mortgage? Does “preapproved” mean I can kick back and relax?
Never, ever relax about a home mortgage.
Pre-approved doesn’t mean crap. It means that they think you meet 3-5 of their most important criterion for home lending. In a home mortgage there are probably 30 or so line items they have to ensure your compliance with before disbursing the money.
Pre-approved or not, you should always include a “subject to financing” clause in any offer you make on a home. This will allow you to back out of the deal if for some reason your loan application is denied.
In my experience, “preapproved” means that you have a letter from a bank or other lender saying that based on your income and credit they are willing to loan you up to some amount, subject to appraisal of the property and other conditions. If your lender is saying it, you should ask him or her which financial institution has preapproved you and to see the preapproval letter. (I would be a bit curious if you were preapproved by a lender that you had not applied to, but that’s neither here or there.)
If you have a pre-approval, you will still need to complete a loan application and obtain an appraisal of the property (and possibly complete other steps) to obtain a commitment letter, which is a promise from the bank that they will lend you the money subject to the conditions it specifies.
So, a pre-approval means something, particularly in showing a seller that you are more likely to get financing than a non-preapproved buyer, but it doesn’t mean you should relax.
Hi vetbridge … Title company Escrow Officer here…
Alot of what I could tell you has already been said. And Billdo seems to have already given you some very sound advice through the course of this thread. So I’ll just pop in and clarify/sum up a couple of things:
Pre-qualified for a loan: doesn’t mean much, except that your lender thinks that based on a preliminary look at your situation they can make you a loan.
Pre-Approved: you have a letter from your lender saying they will indeed loan you X much. As long as the property appraises for a proper amount (the appraisal is done when you decide to go ahead with the purchase). You have to apply for the loan before all of this happens… a realtor can’t “pre-approve” you for the loan. The bank would have to do that.
As far as paying cash for a house: yes, as long as you don’t show up with a paper bag full of unmarked bills or the like, you are ok. Closing agents will want a cashier’s check or wire transfer. But paying for the entire property outright is fine. Whether or not you should depends on your personal finances.
As for the U.S. Patriot Act: Closing agents are supposed to run the buyer’s, seller’s, and lender’s names against a government list of known terrorists to be sure none of you are on it. Cash or mortgage…no difference.
Any finally:
Originally posted by Mama Zappa:
<snip>… if something major turns out wrong with the property (like it’s a new property, the developer doesn’t keep up with all promises etc. and the place turns out unsellable) your money is all tied up and you can’t walk away. OK, that implies that in that situation, you’d screw the mortgage company - but he’s not writing for the mortgage company.
[/QUOTE]
Screw the mortgage company? Good luck. You’d still owe the mortgage. The mortgage company would foreclose and come after you for any deficiency to boot.
A title search should be done regardless…you want to know if there is anything out there that can bite you in the butt. And if something pops up later that should have been caught, you want your title rights to be insured (and uh…hey…if the seller is really even the actual owner of the property in the first place. You’d be surprised what I see) .
The last sentence quoted is exactly backwards: you should get title insurance even if you DON’T get a mortgage. There won’t be a lender there requiring it, but insist on it anyway. Besides, it is customarily the seller’s obligation to pay for the owner’s title insurance that covers YOU anyway 
Best of luck in purchasing your new home…hope everything goes smoothly for you!
Having represented a company that was defrauded by an employee who embezzled large amounts of money that he then ran through various banks, brokerages, and other financial entities, I can say that I am happy that the “Know your Customer” rules exist. I wish the damn banks and brokerages would have taken them a bit more seriously, because they may have realized that the guy should not have had millions of dollars to spend based on his sources of income and history and been able to save a lot of people a lot of money.
I can also say, based on that situation, that there are reasons (such as stopping money laundering, embezzlement, etc.) that such laws exist that do not necessarily consist solely of the big bad government trying to keep you down and peek into your bedroom to determine whether you have gay sex on your piles of money.
Does everything have to be explained solely by “big government watching the little man” theories? I understand this post might be a little harsh, but the “Patriot Act” boogieman popping up here of all places is a bit much.