Do I need to worry about seasoning when rehabbing?

Question

I am not keeping the property, just selling it. I bought for 162 2 weeks ago, will be marketing for 250 range in 2-3 weeks. Will prospect buyers have a problem with their banks lending on my property due to seasoning issues, or is this not something to worry about ?

Ryan Webber · Answer

If it isn't a commercial loan or hard money, then its pretty much conventional, FHA, or VA.

Conventional financing is probably over 70% of all loans.  5% down is typical but 100% financing is very common, also.  Stated income is still conventional, and ARM's are too.  They're all sold on the secondary "conforming" market.  The only thing that isn't normally sold on the secondary is a bank's commercial loans.  That is unless the loan is through one of the bigger lenders (Wells Fargo, Bank of America, etc.).  They would probably keep all their loans, but they will still conform to the secondary standards.

Ryan Webber · Answer

I get around it by wholesaling.  :D

I pretty much only sell to investors, and they have to have cash, hard money, or a commercial loan.

Most of the rehabbers I know just end up eating it in holding costs until the seasoning is up, but obviously as you seem to already have caught on, there are other creative options.  With each of the options there are advantages and disadvantages.  Any option where you are moving the person into the property before you get your money in full could possibly lead to a vacant house that needs to be rehabbed again.

N/A N/A · Answer

Minna,

In most cases you will probably have to wait 90 days.  This does not mean hoever, that you can't take a large (non-refundable) option fee from your buyer before the loan closes.

Good luck,

Rick

Minna Reid · Answer

So what are we talking about here? I can't close again til after three months (doable) or I can't close again for six (NOT COOL). Or i just make "no sesoning requirements" an absolute necessity. Or I do some kind of buy owner financed til seasoning kicks in?

N/A N/A · Answer

watapolice,

I tried that and my loan got kicked back too.  you could try to create a note and sell the note at closing or shortly thereafter.  You may have to discount it some, but it may not be more than what your holding costs would have been.

Good Luck

Rick

N/A N/A · Answer

How do you get around the seasoning requirements - since the idea is trying to off load the property as quickly as possible?  Can you do a shorterm Lease option, collect a large down payment and have the prospective buyers move into the house while the loan process is trodding along?

Who has a list of lenders who do not require seasoning?

Minna Reid · Answer

Ok - when I think "conventional", or "conforming" I see  lots of money down, verified income, good debt to income ratios, one fixed single loan. Aren't most loans non-conforming nowadays, anyway? Or is my view of conforming way off?

Ryan Webber · Answer

Seasoning requirements are an issue for a rehabber.  All FHA loans require at least 90 days seasoning (seller must own it for that long), and if there is less than 6 months seasoning then 2 appraisals are required.  Some conventional lenders are taking on the same requirements.

I wasn't aware that all conforming loans require it, as Jim stated.  Conforming is if the note is to be resold on the secondary mortgage market the secondary market will require it to "conform" to certain standards.  I think it might depend on what type of loan it is.  There are different stipulations for different types of loans.  Your typical conventional loan for a homeowner will most likely have seasoning requirements on it.  I would recommend that YOU start shopping around for different mortage brokers/lenders that don't have seasoning requirements.  You can then refer your potential buyers to these lenders if their lender has seasoning requirements.

Minna Reid · Answer

How?..With a regular bank loan, when the people called my ad. My bank appraised the house at 190 as-is at the time, if that makes any difference.

Jim Gordon · Answer

Only if they try to get a conforming loan on it. The new programs will kick out the house they may need to go with specialty lending.