Delayed Financing Questions That Hasn't been Answered... Yet.

6 Replies

Hello Everyone,

I hoping to get a little bit of clarity on delayed financing. I currently have a HELOC on my primary and will those funds to pay cash on a home. Afterwards, I want to do delayed financing, but I have three questions.

1. Will delayed financing allow me to use future income (i.e before I find a renter to offset my DTI) OR will I need to start the process after placing the tenants? I'm having a property manager take this so it's pretty important for me to communicate this with them so the tenants are aware. I

2. Will I only need one month of bank statements? I used my heloc to paydown a substantial amount of credit card debt to raise my credit score a month prior. Finding and locating copies of those checks will take some time so I was wondering if that would be required so I can get it ready.

3. How can I add the rehab cost to my closing statement so that I can refi my repair cost as well? Do I HAVE to have a contractor lined up ahead of time to use these funds as part of my delayed financing? Will buying a multi-plex also limit me to only 70% LTV?

Also a side note, if anyone knows a community/local bank that allows no seasoning for cash-out refi or how can I finance more than 10 homes after I max the conventional soon in Cleveland, Columbus, and Cincinnati, that would be great.

Thank you.

Joe:

1) With conventional financing, you generally have to show a renter in place to have the income qualify to help your DTI. If you had owned the house for a long time you might be able to show prior renting history, but in your case, it is best to get a renter in ASAP.

2) I've typically been asked for two months, and if the closing isn't fast, another one later.

3) One of the downsides of delayed financing is that you generally CANT put the rehab costs into the new loan.  Many people, myself included, would instead get a hard money loan or private loan to buy and fund the purchase and part of the rehab and then just do a rate & term refi into conventional once the tenant is in place.  Your only other good alternative is to wait 6 months and do a cash-out refi.

4) Many local banks do this.  Reach out to local real estate investment groups

Originally posted by @Joe Jung :

Hello Everyone,

I hoping to get a little bit of clarity on delayed financing. I currently have a HELOC on my primary and will those funds to pay cash on a home. Afterwards, I want to do delayed financing, but I have three questions.

1. Will delayed financing allow me to use future income (i.e before I find a renter to offset my DTI) OR will I need to start the process after placing the tenants? I'm having a property manager take this so it's pretty important for me to communicate this with them so the tenants are aware. I

2. Will I only need one month of bank statements? I used my heloc to paydown a substantial amount of credit card debt to raise my credit score a month prior. Finding and locating copies of those checks will take some time so I was wondering if that would be required so I can get it ready.

3. How can I add the rehab cost to my closing statement so that I can refi my repair cost as well? Do I HAVE to have a contractor lined up ahead of time to use these funds as part of my delayed financing? Will buying a multi-plex also limit me to only 70% LTV?

Also a side note, if anyone knows a community/local bank that allows no seasoning for cash-out refi or how can I finance more than 10 homes after I max the conventional soon in Cleveland, Columbus, and Cincinnati, that would be great.

Thank you.

I have a great lender in Ohio that helps me with all of my properties.

 @Chris Wharton can you help with these questions?

Awesome.  Thank you for the answer everyone. Already connected with @Chris Wharton and can confirm he is awesome for anyone wondering.  I'm a Realtor in Washington State, so I know a good lender when I see one.  

@Joe Jung your best solution for this sounds like a DSCR loan. You can use this after 10 properties and can be used for delayed financing pased solely off the property's income. If you want to use delayed financing without 6 months of seasoning, you can sometimes present receipts and payments to contractors to show the improved value of the property above purchase price if you want to cash out refi at 75 LTV before 6 months of seasoning. If you wait 6 months, you do not have to produce receipts and payment to contractors for repairs.

@Joe Jung just thought I would reply here too just in case. 

1. You will need a renter IF you need that rental income to help you qualify. If your regular income is strong enough, maybe you don't even need that rental income at all. But if you do need it...then you would need a renter in place. Getting prequalified will tell us this up front.

2. And kind of the same answer here - depends on what your prequalification states. Sometimes you only need 1 month (because you are strong enough) and sometimes you need 2 months.

3. Yeah, this is the sticky one to me. The only way I know how to do it (because the only way Fannie/Freddie say to do it) is to show it as a paid cost on your HUD. Not only do you have to know your contractor...then you have to pay them - in FULL - before they even do the work. Yikes! Because it's so hard to do I usually tell people to go this route instead: https://www.biggerpockets.com/forums/48/topics/460294-how-to-cash-out-1-4-unit-property