Newbie... does cash purchase delay a mortgage after rehab?

Question

Just getting started and learning how much I don't know.  I am hoping to buy my first property within the next couple of months, but I've gotten conflicting information about financing it.  I had planned on purchasing and rehabbing it outright in cash, but I heard an experienced investor say that you don't want to use your own cash to purchase a property because you have to own the property for a year before you can get a mortgage.  This doesn't make sense to me, and I'm not certain I heard/understood him correctly.  Is this true?  If so, can someone explain this to me.  Thanks.

Christian Bors · Answer

Account Closed  If you purchase the property with cash and then want to refinance the property most lenders typically require either 6 or 12 months "seasoning" period.  For commercial loans, there are no requirements, its at the banks discretionary.  However, based off your question, I am assuming you are looking for residential mortgage.  So in that case, most lenders will require at least 6 months of "seasoning" before you can refinance.  There are plenty of posts about this topic.  Just search, seasoning period and you will find plenty of posts.

Good luck,

CB

Account Closed · Answer

@Christian Bors @Darren Budahn  Will look up the posts you suggested and see which fits my situation the best.  Thank you!

Darren Budahn · Answer

You will only need to season the property for 6 months if you want an appraisal based on ARV if you find the right lender.

Another option you could do is to pay all cash, then you could use delayed financing to get your purchase cost and closing costs (not rehab costs) back right after buying.  Then, in 6 months, you could do a cash out refinance where you can get a 70% LTV loan based on the ARV.

The major drawback there is that you would have to pay closing costs twice in 6 months.  The main benefit is that you don't have your cash tied up for 6 months waiting for the property to season.

Matt Turbitt · Answer

On a cash purchase you can refinance immediately but what he probably was talking about is they won't look at the ARV only the sale price. Let's say you buy it for 100k cash, put 20 in and now it's worth 150k. In the first 12 months They will give you a mortgage on that house for 75k (keeping 25% in it and using the initial purchase price). So now you have 45,000$ stuck in that house. For the next 12 months.

Newbie... does cash purchase delay a mortgage after rehab?

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