How quickly can you refinance (with new appraisal) after a property purchase?

4 Replies

Hi everyone,

Let's say I want to buy a property with the 3.5% down payment FHA program which would leave me with a large amount of mortgage insurance to pay every month.

If I buy the house under market value (let's assume 75% of value), how difficult would it be to refinance the property a few months after the purchase using the equity in the house? I would go for a 25% conventional loan without PMI.

How many months do I need to wait for a bank to be willing to do a new appraisal and use that appraisal for the refinance (vs. the amount I paid).

I understand that there would be additional closing costs etc but even with those...putting only 3.5% down and then not paying PMI after a few months would be quite a steal.

Has anyone done this before? Have you encountered any issues?

Thank you!

Never tried anything like that but with cash out refinance most banks require 12 months for a new appraisal. Some will do it at 6.

You should be able to do a no cash out refinance anytime, talk to a local broker and talk to them.

Most lenders will call it a cash out refinance if you have owned the property for less than 6 months, but it is do able. Some of my lenders require 2 appraisals, but a great return if you get rid of MI.

You might also look into delayed financing options.

From one of my lenders underwriting guidelines:

For refinance transactions, the current appraisal is used to calculate LTV/value, regardless of the purchase date.

From one of my lenders underwriting guidelines:
For refinance transactions, the current appraisal is used to calculate LTV/value, regardless of the purchase date.

Which doesn't mean they will actually give you a loan based on a new appraisal right after a purchase.

If you buy a property and don't do much to it then the price you paid really is the value. There may be exceptions, but they are rare. This is especially true with a FHA loan. FHA has rigorous inspections to verify the property is in very good condition. Its not going to pass if repairs are needed. So, there's not much you can do that will significantly increase the value, short of a major remodelling or an expansion. Neither of which will add as much value as it costs.

If you do find one of those rare properties that you can buy significantly below its as-is value, you have another problem. You might get a 3.5% down FHA loan. You won't get a refi at 96.5% LTV. More likely you're looking at 90% for OO, 80% or less for investor. I assume you're dealing with OO since you bring up FHA. So, if you buy a $100K house with a $96.5K loan, and its really worth $133K, then you might be able to borrow $120K on a refi. That refi will costs you about $4000 +/-. So you would net about $20K. But again a deal like that is very, very rare. More likely you pay $100K for a house that might appraise at $110K. At 90% you get $99K, so its a wash with your original loan.

if you have more than 4 mortgages (or houses with any debt tied to them), then you can't do a cash out refi at all.

People tend to say you have 4 or more confirming mortgages, but if you have 3 confirming mortgages, and 2 houses in hard money, if they find out about the two (and trust me, they can), they will put you under the 5-10 guidelines with no cash out,,,trust me on this, I know from experience

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