For most folks, paying cash for a house just isn’t an option. Homes are expensive, and while most folks may be able to afford payments on a home loan, chances are pretty good that they don’t have the $50,000, $100,000 or $250,000 that they might need to purchase a new home. In fact, many folks can experience a hard time trying to get together the percentage required for the down payment on their new home loan.

Still, what if it’s an option? What if you have a big chunk of cash, maybe from an inheritance? What if you’ve saved up for a couple of decades, and socked money away each month in order to be able to buy your dream house? Should you pay cash, or should you get a home loan?

How’s Your Credit?

One issue at stake in deciding whether to pay cash or get a home loan is your credit score. Just because you’ve got $75,000 in the bank doesn’t mean you have a good credit score.

You see, your credit score is going to determine what kind of home loan interest rate you can get. If your credit stinks, you’re going to have to pay a higher rate. For example, someone with good credit might be able to get a home loan for 6 percent interest or less. Someone with worse credit might have to take a home loan at 9 percent or worse. The better your interest rate, the better idea it is to take the home loan.

Do You Qualify for Special Programs?

There are a number of different home loan programs out there that make buying a home a relatively inexpensive process. FHA home loans, for example, can get you a stellar interest rate and a low down payment. If you qualify for some of these programs, you may find that you’re actually saving quite a bit of money.

The downside to these programs is that they usually have limits on how expensive the house can be. So, if you’re looking at a $90,000 house you’re probably OK, but a $500,000 house is probably not going to qualify for the program.

Can You Make Money with your Investments?

Finally, you need to think about what you’d do with the cash you have. If you can make more by investing it than you’ll be paying in interest on your mortgage, it can be worth investing. On the other hand, if you’re inexperienced in investing, you might not want to take the risk.

Photo via The Cleveland Kid