[Read: Secrets of Successful House Flippers.]
5. Free up additional cash. A down payment of 20 percent or more allows buyers to avoid private mortgage insurance and qualify for a better interest rate. Freeing up even more cash could help seal the deal. Cheryl Farley, a San Jose-based financial adviser for Bank of the West, has worked with homebuyers who used an investment line of credit in lieu of a mortgage to secure a new home. "It gave them the temporary ability to use a cash bid and then turn around and put a delayed mortgage behind that," she says.
Farley points out that even buyers who can afford to pay cash may choose to get a mortgage so they qualify for the tax deduction and take advantage of low interest rates while investing their money elsewhere.