Sometimes a borrower feels that the only way they can win a house is to pay cash for it. They've been beaten before. They'd found their perfect home, but they just couldn't compete. Most times you'll find that dream house again. We find there's a time that when people do, they don't want to mess around—they want to pay in cash.
They have access to it, but it's not theirs, rather it's, say, their parents or a family member's. They know they need to do something with a loan, but they're not sure how to go about it. So, they reach out to us and we get the question of how to buy a house with a cash offer while simultaneously getting mortgage financing.
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How to buy a house with cash offer while getting mortgage financing
We had this situation come up recently. The borrower that called us had been working with another mortgage broker and the borrower put out because she was wanting to use her mom's cash to put an offer on a home, but then she wanted to turn around and buy it from her mother. The other broker was basically saying pick one—they didn't want to deal with two sets of purchase closing costs. We told her they don't have to. We told her that what we can do is use her mother's cash, making her mother the lender, and then the day after she closes, we turn around and do a refinance on the loan.
How we solve the problem
Now, whoever it is that's going to be buying the house with cash, we want to view them as a private lender. They're going to put a note and deed of trust on the property, and you're going to use their funds to buy the house. This will effectively have the same strength as using cash because you will be going through a private lender without layers of underwriting guidelines or appraisal requirements to worry about.
So how do you do this?
So, start by talking to your lender, make sure you have them on board. Next, if you were talking to us, we'd say talk to the escrow company and make sure that the escrow officer can help you draft a note. They will put a deed of trust. This step is really key. It's important you have a note with the lender saying how much money they are going to owe you, how much the mortgage is going to be, the interest rate, and term. You want to make sure, as well, that the note looks normal and that it has standard market terms. You wouldn't want 0% interest or anything that would make it seem out of the normal.
Any complicated parts?
The most complicated scenario of this is if gifting becomes involved. A lot of times not only does a parent or a relative want to help with paying cash, but they also want to give a 10% or 20% down payment. So, one of the questions we'll be asking you is what amount you want to refinance out. Say, you pay $200,000 for the house and your relative wants to give you a 20% down payment, in that case, we'd only be refinancing the amount of $160,000 and that would be the amount of the loan. The other component would be considered a gift.
If you have any questions about this or if you have any questions you'd like us to answer on our podcast, you can submit your questions using our contact form or give us a call at +1 (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
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Frequently Asked Questions
Can I buy a house with a cash offer and still get mortgage financing later?
How does using a family member’s cash work in a home purchase?
What steps are involved in setting up a private loan for a cash offer?
What if part of the funds is a gift from a relative?
Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
Discover how you can combine a cash offer with mortgage financing when buying a house. To expand your understanding, check out our guide on delayed financing, see an example of a mortgage recast, explore the benefits of an assumable mortgage, and learn more about the FHA flip rule waiver.
Mortgage Brothers LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Mortgage Brothers NMLS 1007154, NMLS #210917 and 1618695. Equal Housing Opportunity.
Transcript of the Mortgage Brothers Podcast
Buying a House with a Cash Offer and Simultaneously Getting Mortgage Financing
Introduction [00:05]
Welcome to the Mortgage Brothers Podcast! I'm Eddie Knoell, and I'm Tom Knoell. Today, we're answering a question that many homebuyers don't even know how to ask:
- How can you buy a home with a cash offer if you don't have cash?
- Can you still get a mortgage after using cash to buy a home?
This happens more often than you think—especially in competitive real estate markets where buyers struggle to win bids. Let's break it down!
Why Do Buyers Use Cash Offers? [00:40]
Many buyers find themselves in this situation:
- They've been outbid before and realize cash offers win.
- They have a relative (e.g., parent) with cash who's willing to help.
- They need a loan, but using cash first helps secure the deal faster.
Common Scenario:
- You find your dream home but realize sellers are only considering cash offers.
- A family member (e.g., parent) has cash and offers to help.
- But you still need a mortgage after purchasing the home.
The solution? Buying with cash and then getting mortgage financing after closing!
Case Study: How a Borrower Used Cash and Then Refinanced [01:14]
One of our clients was working with another broker who told her she had to buy the home from her mother after closing—resulting in two sets of closing costs.
We told her that's not necessary. Instead, we showed her how to:
- Use her mother's cash to buy the home as a cash buyer.
- Structure it as a private loan between her and her mother.
- Immediately refinance after closing to pay her mother back—without extra purchase costs!
This is called rate and term refinancing—it lets you pay back your private lender right after buying the home.
How Does This Process Work? [02:23]
Instead of buying the home from your relative, your relative becomes the lender. This means:
- You use their cash to buy the home.
- They act as a private lender instead of a co-buyer.
- You refinance right after closing to repay them.
Key Advantage: Since your relative isn't underwriting the loan like a bank, the deal still counts as a cash offer, making it highly attractive to sellers!
Step-by-Step: How to Buy a Home with a Cash Offer & Then Get a Mortgage [04:43]
1. Find a Lender Who Understands This Process
- Not all lenders will structure this correctly.
- Work with a mortgage team that has done this before.
2. Set Up a Private Loan with a Deed of Trust
- Your family member (or private lender) provides cash.
- The title company creates a loan agreement (deed of trust).
- You sign a note stating you'll pay them back (just like a normal loan).
3. Buy the Home with Cash & Close the Deal
- The seller sees a cash offer with no contingencies.
- You win the home without loan-related delays.
4. Apply for a Mortgage (Rate & Term Refinance)
- Once you own the home, you immediately refinance to pay off the private lender (family member) and convert the private loan into a traditional mortgage.
5. Repay Your Private Lender with Mortgage Funds
- The refinance loan pays back your family member.
- You now have a regular mortgage like any other homebuyer.
Important:
- The private loan must have market terms (interest rate, repayment terms).
- The lender must charge some interest—it cannot be a gift.
- You may need to make one monthly payment before refinancing.
Common Questions About This Strategy
Q: Can any relative do this, or does it have to be a parent?
A: Any relative (or even a private investor) can do this. The key is that they act as a lender, not a co-buyer.
Q: What if my relative also wants to give me a gift?
A: That's fine! If the house costs $200,000 and they want to gift 20% down, your loan would only need to refinance $160,000 instead of the full amount.
Q: Does this count as a regular refinance?
A: Yes! This is called a rate and term refinance, which has better interest rates than cash-out refinances and allows you to refinance up to 95% loan-to-value (LTV).
Why This Works: Cash Strength + Mortgage Flexibility [08:11]
This strategy is a win-win because:
- Sellers prefer cash offers (higher chances of winning the deal).
- You get a mortgage right after closing (instead of waiting months).
- You avoid extra purchase costs—you only pay for one transaction, not two.
It's like “having your cake and eating it too”—you get the benefits of a cash offer and the affordability of a mortgage!
Final Thoughts: Should You Use This Strategy? [09:20]
This works best if:
- You're competing in a tough housing market.
- You have a family member or private lender willing to help.
- You need a mortgage but also want to win with a cash offer.
Make sure you work with a lender who understands how to structure this properly!
If you're thinking about using this strategy, reach out to the Mortgage Brothers Team for a free consultation. If you found this video helpful, like, subscribe, and hit the notification button for more mortgage insights. Thanks for tuning in!