Cash purchase w/ ReFi into FHA?

4 Replies

Hi BP! I have been studying/working hard to land my first deal in northern NJ but keep getting beat out by cash offers on cash flowing deals. Before I go down the path of private money, I have a question regarding a particular strategy that there doesn't seem to be much discussion about --

I have heard that buying with 100% cash and refinancing into an FHA or 5% owner-occupy conventional loan after a seasoning period is a possibility. While this would require "house-hacking" and losing the rental income from one unit for a year, I have a high W-2 income that could compensate for the reduced cash flow in Year 1 of ownership which should make the banks happy. I have found a property that cash flows well even considering the increased mortgage pmts/PMI related to the 3.5%-5% down pmt option, and I would of course be willing to follow the owner-occupy rule for Year 1.

Does anyone have any experience with this? Any lenders that can weigh in on this strategy? All feedback is greatly appreciated!



@Mike Teri You can cash out any time when  initial purchase is in cash, no seasoning period required.  Ask your bank to Underwrite the file without property address so you can close fast. this kind of approval will help you to close fast.  

Yes my man you are on the right track. We make cash offers all the time and are constantly told that there were higher offers but they chose us because we are cash. Don’t even bother trying to get in the game without cash in North and Central Jersey. Now,I’ve never heard of cashing out into an FHA or any PMI loan because banks will only give you 70 to 80% of the value which therefore no PMI is required. But I could be wrong. Follow up on that. And part of creating wealth is not just making the money but learning how to keep it, so get the hell out of Hoboken.

Thank you @Harjeet Bhatti for the tip, I was always under the impression there needed to be a seasoning period even with cash purchases. I will follow up on this with local lenders.

@Gary Barella my experiences certainly match your advice, but the Catch-22 is that raising cash typically requires having a few successful deals under your belt first, and I can't seem to land the first few deals without raising all cash. I have made solid contacts at local REI meetups to start partnership discussions, so hopefully that will add leverage to my first deal(s). But after reading up on cash-out FHA refinance options with mortgages up to 87.5% LTV, this looks like one of only a few avenues available to me where I might be able to land my first deal with my own capital (with a hard money loan, of course).

And as for Hoboken -- I'm milking a sub-$1000/mo rent situation at the moment in an apartment that is certainly under market value -- so until that fountain runs dry, this will be my home!

Thanks for your input so far!