Buying a house without a mortgage is legal in every state, and you have three practical paths: pay the full price in cash, arrange seller financing, or borrow from a private lender. Each skips the bank’s underwriting timeline, and each shifts responsibilities the bank would normally handle — appraisals, title work, insurance requirements — onto you. What follows is how the paths differ, what they cost, and the steps that still apply when no lender is in the picture.
Paying Cash
A cash purchase means delivering the entire price at closing, usually by wire transfer or cashier’s check. With no lender involved, you skip the loan application, the appraisal requirement, and the underwriting window that stretches financed deals to 30–45 days. Cash closings often wrap up in one to two weeks once the title search is complete.
The savings are real. You avoid loan origination fees, which commonly run 0.5%–1% of the loan amount. You never pay private mortgage insurance, which applies to many borrowers who put less than 20% down. And you eliminate decades of interest, which on a 30-year mortgage can exceed the original loan balance.
The trade-off is liquidity. A large share of your capital sits in a single, illiquid asset, leaving less room for other investments or emergencies. You also lose the mortgage interest deduction entirely, which matters more at higher price points (see the tax section below).
Seller Financing
Seller financing means the property owner acts as the lender. You make monthly payments to the seller under a written agreement, and the seller keeps legal title as security until you finish paying, at which point a deed transfers ownership to you. This opens the door for buyers who can’t qualify for traditional financing, and it lets both sides negotiate interest rates, down payments, and repayment timelines without a bank’s guidelines.
The most common structure is a contract for deed, sometimes called a land contract. The flexibility carries real risk. If you miss a payment or can’t make a required balloon payment, the seller can often begin eviction proceedings faster than a traditional lender could start foreclosure, and you could lose both the property and every payment you’ve already made. The seller might also fail to disclose an existing mortgage or lien on the property, or collect money from you for taxes and insurance and never actually pay those bills, leaving you with large debts when you finally receive the deed.1Consumer Financial Protection Bureau. What Is a Contract for Deed?
Protect yourself before signing. The agreement should spell out the interest rate, amortization schedule, consequences of default, and a clear timeline for when you receive the deed. Have the contract recorded in the county land records so your interest in the property becomes part of the public record. Run a title search first to verify the seller actually has clear title.
Federal Rules the Seller Has to Follow
Under the Truth in Lending Act’s Regulation Z, a natural person who provides seller financing on more than one property in a 12-month period is generally treated as a loan originator, which triggers disclosure requirements, ability-to-repay rules, and licensing obligations. A natural person selling just one property per year is exempt from the loan originator rules, as long as the financing does not result in negative amortization.2Consumer Financial Protection Bureau. Regulation Z 1026.36 – Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling
Entities such as LLCs, corporations, and trusts get a slightly different threshold: up to three properties in any 12-month period without being treated as loan originators, but only if the financing is fully amortizing (no balloon payments), uses a fixed or reasonably adjusted interest rate, and the seller makes a good-faith determination that you can repay.2Consumer Financial Protection Bureau. Regulation Z 1026.36 – Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling Above those limits, the SAFE Mortgage Licensing Act may also require the seller to register or obtain a state mortgage loan originator license.3eCFR. Part 1008 SAFE Mortgage Licensing Act – State Compliance and Bureau Registration System If a seller offers terms that ignore these rules, treat it as a warning sign.
Private Lending
Private lending means borrowing from an individual investor, a private fund, or a non-bank entity. These loans, sometimes called hard money loans, are formalized with a promissory note and a mortgage or deed of trust recorded against the property, just like a bank loan. Terms are negotiated directly between you and the lender, outside institutional guidelines.
That flexibility is expensive. Interest rates on private real estate loans generally range from about 9% to 15%, depending on the property, your experience, and the loan-to-value ratio. Terms are also short, commonly one to three years rather than 30. Private lenders typically require a first-lien position, meaning their claim takes priority over any other debt secured by the home if you default. These loans work best as short-term bridges, for example when you need to close quickly and plan to refinance into a conventional mortgage afterward.
Due Diligence You Now Own
When a bank finances a purchase, it requires an appraisal, a title search, title insurance, and often a home inspection to protect its investment. Without a lender, no one requires any of it. Skipping these steps to save money is one of the biggest mistakes cash buyers make.
Home Inspection
A professional inspection can surface problems a walkthrough won’t: mold, electrical hazards, foundation damage, failing HVAC, code violations. Foundation repairs alone average over $5,000, and replacing an HVAC system runs around $7,500. Once you close, those costs are yours. You have no leverage to renegotiate the price, and the seller typically has no obligation to fix anything.
Title Search and Title Insurance
A title search examines public records for liens, unpaid taxes, easements, and ownership disputes that could affect your rights. Without one, you might learn after closing that a previous owner’s unpaid contractor, ex-spouse, or tax debt has a claim on your home.
Title insurance covers what the search misses: forged documents, undisclosed heirs, clerical errors, liens that didn’t turn up. Mortgage lenders require a lender’s policy, but only an owner’s policy protects you as the buyer. Cash buyers should still buy an owner’s policy. Premiums typically run 0.5%–1% of the purchase price, paid once at closing, and the policy lasts as long as you own the home.
The Contract and the Closing
In a cash deal, the purchase agreement should state explicitly that no financing contingency exists. You’re committing to buy regardless of whether a lender would approve the deal, which removes a layer of protection mortgage buyers rely on. Build any protections you want — inspection contingency, title contingency, a walk-through — into the contract yourself.
At closing, funds go to an escrow agent rather than to the seller directly. The escrow agent holds the money and the deed until all conditions are satisfied, then arranges notarization and recording. Recording with the county creates the public record of your ownership and establishes your priority against any later claim.
Closing Costs That Still Apply
Paying cash eliminates lender-related fees, but several costs remain:
- Title search fee and owner’s title insurance premium, together running from a few hundred dollars to more than 1% of the purchase price.
- Recording fees, generally $25 to $250 depending on the document and local rules.
- Transfer taxes, imposed by about 36 states and the District of Columbia, at rates from as low as 0.01% of the sale price to roughly 2% in the highest-cost jurisdictions. Fourteen states charge none.
- Attorney fees, typically $400 to $3,500, in states that require one or where you choose to hire one.
- Escrow and settlement fees charged by the title company or closing agent.
Total closing costs for a cash buyer usually run 1%–3% of the purchase price, meaningfully less than the 3%–6% common in financed transactions.
Taxes When There’s No Mortgage
Form 8300 Reporting
Any business or person who receives more than $10,000 in cash in a single transaction, or in related transactions, must file IRS Form 8300 within 15 days. In a real estate deal, this obligation typically falls on the settlement agent, broker, or seller, not on you as the buyer. The filer must send you a written notice by January 31 of the following year.4Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,000 For Form 8300 purposes, “cash” includes cashier’s checks, money orders, and bank drafts, not just physical currency.
No Mortgage Interest Deduction
The biggest tax trade-off is losing the mortgage interest deduction. Homeowners who finance can deduct interest paid on up to $1 million of acquisition debt for mortgages originating or refinanced in 2026 and beyond, following the scheduled expiration of the 2017 tax law’s lower $750,000 limit. Paying cash means there’s no interest to deduct.
If you later take out a home equity loan or line of credit on a home you bought with cash, you can deduct the interest only if the proceeds are used to buy, build, or substantially improve the home securing the loan.5Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction Borrowing against equity to pay off credit cards or fund a vacation won’t qualify.
Capital Gains Exclusion Still Applies
Paying cash doesn’t change your eligibility for the capital gains exclusion when you sell. If you owned and used the home as your primary residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain from your income, or $500,000 if married filing jointly.6Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
If You’re the Seller Financing the Deal
Sellers who provide financing can report capital gains on the installment method, spreading the taxable gain across the years payments are received rather than recognizing all of it in the year of sale. Each payment splits into three parts: return of your original investment (tax-free), capital gain, and interest income.7Internal Revenue Service. Publication 537 – Installment Sales Sellers who receive $600 or more in mortgage interest from the buyer during the calendar year must also file Form 1098.8Internal Revenue Service. Instructions for Form 1098 – Mortgage Interest Statement
Insurance Is Still on You
A mortgage lender would require homeowners insurance. Without one, no one does. A single fire, severe storm, or liability claim from an injury on the property can cost far more than the home is worth. Homeowners insurance covers property damage, personal liability, and additional living expenses if the home becomes uninhabitable, and the annual premium is small compared to the value at stake. Buying without a mortgage doesn’t change the math on insurance; it just removes the party that would have forced you to carry it.