Hard Money Lender to buy Foreclosure then Refi ASAP

14 Replies

Hi Folks! I'm thinking of buying a foreclosure or an undervalued property using Hard Money to buy in cash and then want to refinance to a conventional loan ASAP. This will be a primary residence to live in 2-5 years. We plan to either hold as a rental or sell to buy a primary + investment property.

Questions:

1) Would I need to have the title in my personal name so that I can refinance it based on our household W-2s and credit history?

2) How soon after the purchase can I refinance using conventional loan?

3) Has anyone does this successfully? If so, I would love to hear your story!

Thanks BP family!

@Aldwin De Torres Unless you have everything pre-cleared with your lender (and/or have a stellar deal), this process can take a few months. 

I would suggest talking with a few mortgage brokers and wholesalers in your market to get a better idea. 

@Omar Khan Thank you! I'm anticipating a move to Austin, TX for job relocation. That's where I hope to find a deal or in the surrounding cities. I'll try to connect with people there. Do you happen to know wholesalers in the Austin area?

1. If you want a conventional (conforming) loan, then yes, the property must be titled in your name. This will allow you to get the best rate possible.

2. You can refi immediately, up to 70 - 75% LTV. A cash-out refi, as it's called, will typically require a seasoning period.

- A HM loan is Not cash, it is still a financed loan

-No HML will lend on your personal residence, they are not allowed

-Many/most hml’s will require you to buy in an llc/entity, to avoid the above

-yes, the property must be in your personal name to get a conventional loan

- yes, you can refi immediately....for the same loan amount you already have.....you have to wait at least 6 months to refi based on appraisal value

-If property condition is a reason for the HM loan, you can buy with a 203k or a conventional purchase/Reno loan, refi out of you want after 6 months

@Aldwin De Torres why not just use a conventional rehab loan or a construction loan?

If you qualify for bank financing then the terms will be a lot more favorable. Hard money is the last option in my book.

@Kris Wong Thanks for the reply. From what I've heard, if I find a foreclosure, auction, or seller wants all cash, then I may have to get a HML involved. If that's the case, I think the title would have to be in a separate entity due to Frank Dodd? I may be totally wrong..

Is seasoning period 6 months?

@Wayne Brooks Thanks Wayne! I think your response covers my train of thought and action. 

I mainly bring up HM in case the situation requires funds to be deployed in full quickly (auction, foreclosure where bank wants all upfront, or motivated seller needing cash and quick close). I'm hoping to get the best price on a SFH or duplex where I can add value in 2+years.

My first choice to fund the purchase would be some type of conventional as you mentioned. 

Have you heard of or experienced a similar scenario I just described and it worked out well? or maybe had some pitfalls?

@Jordan Moorhead Yep, I agree. 1st option is to do something conventional related. HML is considered if the purchase needed a quick close or maybe a foreclosure/auction that needed payment immediately.

On a 203k loan, the bank/lender sends an appraiser to evaluate the ARV of the property and determines the loan amount based on that, right? As the borrower, am I forced to take the total loan amount offered or can I take less if I plan to do some work myself?

HML and auction don't seem to go together at purchase, ..even hard money I dont think can approve and wire the funds for the 12pm due deadline the next day....you risk losing your deposit for a deadline by financing with a lender....HML as said by Wayne is not cash..

private money is a different story..

(this applies to county auctions, maybe auction.com is more flexible, normal closing length, I haven't participated yet...)

Originally posted by @Seth Reichenau :

Hi Aldwin Torres, what ended up happening? Were you able to find a foreclosure and then refinance with a conventional loan? I'm in Austin too and I'm interested in trying this.

Hi Seth, since moving here last July, I got as far as networking, meeting HMLs, interviewing GCs, walking properties, but since COVID, I took a step back and didn’t pursue anything. I wanted to make sure my household was in order. I’ll make more progress in 2021.

Thanks,

Seth