BRRR Lender Low Seasoning Req

6 Replies

I have a house that I'm closing on and plan to rent it out.  If I pay cash, I want to (ideally) get all my cash back out with a refinance once we have rent coming in.  Does anyone know a of a bank or lender that has minimal seasoning requirements and how long those requirements are?  I'm okay with a 15 year amortization or longer, and a commercial (non-fannie type) lender.

Thanks in advance

Many traditional lenders will allow you to do a cash out refi after 6 months of holding the property, as long as there is equity to do so.  So, there shouldn't be a need for a hard money lender unless you have other qualifying issues.

You may or may not get all of your funds back out. Some will allow up to 75-85% for a non-oo cashout refi. You will want to find a place that will allow the highest amount off of an Appraised value (not purchase price).

The Delayed Financing Exemption allows you to PAY CASH and get your money back out before six months.  It is a Fannie Mae product: 

https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html

@Robert Shoffner

What @Kerry Baird said. Here is also something I saved from another post I read about the delayed financing exemption:

1. The Conventional Rules For a Cash Out Loan

Fannie Mae and Freddie Mac are the Government Agencies that sponsor conventional lending. Most banks will have these loans as an option. There are other loan types as well but for brevity we will limit this post to the “Conventional” lending (Fannie/Freddie).

  • Conventional Loans limit your cash out on an investment property to 75% of the “After Repair Value” on a Single-Family home (70% on a 2-4 unit home). This is also the same percentage that you need for a non-cash out refinance (more on why that is important later).
  • If you purchased the investment property with a loan, then conventional loans will require you to wait 6 month to take cash out.
  • This rule does not apply if you purchased the home with CASH (more on that in section 2).

Let’s explore some examples here:

If you purchased a property with a 15% down conventional loan (85% loan to value) and you wanted to get cash out, you wouldn’t be able to do so since the cash out limit is 75% of the “Loan to Value”. The MAXIMUM cash out you can receive is 75% of the value of the property.

If you purchased a property with a loan, but did the rehab on with your own cash, then you would need to wait 6 months to get that cash back. Keep in mind you could only receive 75% back of the After Repair Value.

So if you bought a home with a loan of $50k, it required $30k in renovations, and it appraised for $100k after the repair work was complete then….

You would refinance the $50k loan, receive back $25k in cash…since $75k would be 75% of the After Repair Value.

2. Buying a home with Cash

Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:

If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.

There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC

BUT you will be limited to the amount of….

Your purchase price + closing costs (costs when you purchased the home)

OR

75% of the “After Repair Value”…

WHICHEVER IS THE LOWER AMOUNT (super important)

These rules are important to understand so here are two examples:

Example 1: If you purchased a home with $50k of cash, and put $30k of renovations into the loan, and the home was worth $100k. 75% is $75k and $50k is your purchase price. So you could only receive $50k in your first 6 months ofownership since the LOWER amount is your purchase price. After 6 months you could receive the full 75% of the ARV.

Example 2: If you purchased a home with $80k of cash, put $5k into the home, and the home was worth $100k. 75% would be $75k and your purchase price is $80k…so the lower amount is $75k.

When buying a home with cash you can absolutely get cash back right away but you will be limited to the lower of those two amounts.

@Robert Shoffner ,

Robert, I'm in NC as well and just did what you are trying to do.  I was going to all kinds of lenders and everyone was telling me I'd have to wait 6 months.  I stumbled upon the fannie mae exception here on the BP forums that the others have referenced.  Seems like it's a little known exception by most loan officers.  I ended up working with a Lori Diebold from First Citizens for my cash out refi.  Rate was OK at 4.625.  Not sure where it is now.  Their application process was pretty intense.  I've done several refi's and theirs was the most comprehensive by far.  They initially quoted me 45 to 60 days to close which I thought was absurd and I told them as much.  I think we eventually closed it in about 40 days.  

@Robert Shoffner

Not sure if you found your financing yet or not, but I thought I'd throw my two cents in.

These refinances are best viewed through the prism of a game show.  If you watch The Price is Right and follow the game Plinko, you'll understand what I mean.

Your loan is like the chip that you drop into the top of the board and each peg the chip hits determines the type of loan you're going to qualify for.

Your absolute best bet is to wait 6 months and do a cash out refinance with the appraised value.  You'll get the best rates, least expensive and longest term.  This is a full doc, Fannie/Freddie type loan.  With this option on the Plinko board, you didn't hit any pegs because you can go full doc and your seasoning requirement is satisfied.

You want to go earlier, so you just hit a peg.  Delayed financing is your only option to go Fannie Mae with less than 6 months seasoning.  The pros are you can cash out up to the purchase price.  The cons are you're limited to the purchase price and money that you put into renovations are not part of the refinance.  You may be able to find a credit union or local bank that will finance you with less than 6 months, but they are few and far between.  Probably at some obscure place on the Plinko board.

The next peg you may hit is you want cash out using the appraised value with less than 6 months seasoning.  Those loans are out there, but you need a good broker to drop your chip in the top of the board to see which lender is going to be the best for you BEFORE you spend money on an appraisal.  They should be able to tell you seasoning requirements, income documentation requirements, minimum loan sizes, rural stipulations and a host of other factors that come into play when they are determining where to place your loan.  

Your loan can probably be done, it's just a matter of how, when and how much.

Hope that helps

Stephanie

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