They all say 12 months season for a cash out refi??

33 Replies

Hi Everyone! I read Andrew Postell's post about doing cash-out refi's and he says in there that if you pay for the home with cash or a HELOC that you can get a cash-out loan on day 1. I've called 4 credit unions and they all said the same thing: 12 months seasoning on an investment property even if we pay cash. They said it's a Freddie/Fannie rule.

I'm so confused!

I don't know this Andrew fellow, @Nikki Closser , but typically you can get delayed financing immediately. The catch is that it's based on the lessor of purchase price or appraisal. So it won't be "cash out." It will be 75-80% LTV.

Keep calling around to banks and CUs. If they're a portfolio lender, they won't have to adhere to Fannie/Freddie rules.

If you are only looking at conventional lenders and Freddie/Fannie products you will keep bumping your head against that wall however their are more investor friendly lenders that can refi prior to the 12 month period. 

@Nikki Closser

They have what's called an overlay. They add additional rules on top of what Fannie and Freddie require. Fannie Mae offers delayed financing so what you need is a Loan Officer or Broker who has experience in this arena. This is doable and you'll have to provide additional documents to pass all the delayed financing guides but paying cash is a huge first step in right direction.

@Shaun Weekes

Delayed financing LTV's are lower as well. 70% for SFR's and 65% for 2 to 4 unit properties. After 6 months both those numbers move up 5%

Originally posted by @Ryan Keenan :

@Nikki Closser

Just a thought , delayed finance does not let you take out your rehab costs only what you paid for the property.. how do you plan on using it to move faster?

After 6 months you can get 75% of the value though, right? I’m not exactly sure I understand your question. Please forgive me — I’m still learning 😉

 

Originally posted by @Ryan Keenan :

@Nikki Closser

Just a thought , delayed finance does not let you take out your rehab costs only what you paid for the property.. how do you plan on using it to move faster?

Also, I guess this confuses me even more as to how people are recouping their rehab costs with a BRRRR??

 

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@Nikki Closser

This has frustrated me too but with delayed finance you can get back what you paid for the property or 75% of the ltv (which ever is the lower number not exceeding your purchase price.

Purchase for 100k and after rehab it appraises at 150k..

75% of 150k is 112,500 however you can only get back 100k because 112,500 is over the purchase price. Unless you wait the 6 months. There are lenders out there that will do 6month seasoning I'm doing one now.. that only leaves 2 deals a year unless you have alot of cash hanging around.

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@Nikki Closser Listen to the BP podcast with @Alexander Felice . Think it's #301 if I'm remembering right. He walks you though exactly how to put repairs into HUD, escrowed with title so it shows as part of purchase price. You can also check out his brokeisachoice website to see how he does it. Super nice, well-read dude, lots of info & worked as an underwriter. 👍🏼 also he has great hair.

@Steve C.

Mention my hair and I appear. I'm like a genie in that way.

12 months is a bank overlay, many do it, but they don't all do it.

6 months is the standard Fannie Mae guideline.

You can forego the 6 month seasoning with a Fannie loan if you use delayed finance. The rule with delayed finance is 75%ltv or 100% HUD, whichever is lower. So I put the rehab costs on the HUD, then it's 100% of HUD which I strive to still be lower than 75% anyway so I don't leave any money in the deal.

Downside here is that you have to pay for rehab UP FRONT, and with no outside borrowed funds.

Andrews method is different than mine, and after suspiciously examining it I think it MIGHT be better than mine...although not as elegant 😉😉

Hope this helps.

Originally posted by @Steve C. :

@Nikki Closser Listen to the BP podcast with @Alexander Felice. Think it's #301 if I'm remembering right. He walks you though exactly how to put repairs into HUD, escrowed with title so it shows as part of purchase price. You can also check out his brokeisachoice website to see how he does it. Super nice, well-read dude, lots of info & worked as an underwriter. 👍🏼 also he has great hair.

Fantastic!!! Thank you!! 🙌🏼👊🏼 

@Alexander Felice Which Andrew? Curious about the method you think may be better than yours?! I’m flying to memphis in 2 weeks & planning to use your method.. unless you’ve discover something else I should know? Hair. 😂 Thanks for being a motivational force!

Originally posted by @Alexander Felice :

@Steve C.

Mention my hair and I appear. I'm like a genie in that way.

12 months is a bank overlay, many do it, but they don't all do it.

6 months is the standard Fannie Mae guideline.

You can forego the 6 month seasoning with a Fannie loan if you use delayed finance. The rule with delayed finance is 75%ltv or 100% HUD, whichever is lower. So I put the rehab costs on the HUD, then it's 100% of HUD which I strive to still be lower than 75% anyway so I don't leave any money in the deal.

Downside here is that you have to pay for rehab UP FRONT, and with no outside borrowed funds.

Andrews method is different than mine, and after suspiciously examining it I think it MIGHT be better than mine...although not as elegant 😉😉

Hope this helps.

Now I have to look at your photos to check out this amazing hair of yours. Ok, so let's say we buy a home for 85K using our own HELOC and we need 50K for rehab. But, we only have 100K in our HELOC, so we borrow from my in-laws HELOC. You are saying that we can't escrow the 35K we borrow from my in-laws?

@Steve C.

Andrew Postell, mortgage broker who hangs out around here. His process has a seperate business entity hold the property first, then the individual doesn't have to abide by the seasoning. Like anything else in lending, the details are what matters, and not all banks do the same things.

I'm sure he will pop in here to explain further, I dont want to muddy the info up with something I'm not super sure of.

Im sure you will do great in Memphis. 🤟

@Nikki Closser

Yes, when using delayed finance, you might be able to use your in-laws heloc if they are on the deal. If they are not part owners of the deal and the note, I think you'll run into trouble. Either way I think its going to tricky.

The issuing bank will source the funds to see where they came from.

Sorry for the bad news 😬

Credit unions can be a bit of a tough nut to crack. Our back-end lenders look like this:

- Community Banks: 12

- National Banks: 0

- Credit Unions: 1

I would call around the local banks (it will probably take quite a few calls) to find one. Ask local investors and see who they use. That's your best bet.

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