Best loan options today to pull money back out after purchasing SFH with cash?

Question

Hey all,

I bought a foreclosure home using cash, about a month ago. Fortunately it does not appear to need much repair/renovations. I will not know the finer details until I get the former owner removed (in the process of that now). However, the goal is to mortgage it to get the cash back out in order to move on to the next property (BRRRR). Considering high interest rates, I want to find the best options for greatest return. Any thoughts, suggestions?

Thanks

Sasha Mohammed · Answer

we just ran into a similar question -- someone who had bought at an auction with limited to no rehab needed. We ran it by a conventional lender to see how they would handle delayed financing.

answer: we could immediately use new appraised value, however, the max LOAN amount was capped at purchase price plus closing cost from the auction transaction.

same cash-out LTV maximums applied, so long as the new loan did not exceed the above, we were good to use appraised value.

if you wanted a loan to exceed the original purchase price plus closing-costs, then you would have to wait the 6month seasoning for a traditional cash-out refinance.

OR you could try to go with some type of NonQM lender; there are some that will let you do cash-out with new appraised value within 3 months, so long as you can document the renovations. Which, in your case, there don't seem to be any.

Matthew Gaddis · Answer

You could get delayed financing which would allow you to pull your cash back out or find a lender with a no-seasoning cash-out refinance.

Matthew Crivelli · Answer

@Darius Holloway

Cash out refinance is loan to value

Delayed Purchase is loan to cost

If you simply bought a rental and need to pull the invested money out quickly you will be good to go with delayed purchase financing. (LTC)

If you bought at a major discount and want to tap into the property's equity, you will likely need to wait for a seasoning period to end before a full cash-out can be preformed. Typically 6 months. (LTV)

Like others have said, if delayed purchase financing works for you, you want get the loan process started soon. Typically you only have 90 days after the initial purchase to close this type of loan.

Dylan M. Davis · Answer

Delayed financing could be an option. You can also do a stabilized cash-out most likely base rates may be 8%. 75% LTV would be the max if the property is stabilized and doesn't need any rehab.

Eliott Elias · Answer

You will have to use DSCR or commercial lending.

Corby Goade · Answer

Some good, specific advice above. The simple answer is that a conventional cash-out refi will always be the cheapest option. If you want as much of your cash back as possible, wait the 6 month seasoning. If you want SOME of your cash back asap, used delayed financing.

Good luck!

Jay Hurst · Answer

@Darius Holloway   That would just depend on if you qualify for conventional or not. Conventional will have better rate, lower upfront costs, and will NOT have a pre-payment penalty. My advice in general is to exhaust your 10 conventional loans before moving on non-QM/DSCR loans if you can qualify.

Darius Holloway · Answer

Right. Any thoughts on pursuing conventional vs. non-conventional if I wait the seasoning period?

Jay Hurst · Answer

@Darius Holloway    Delayed financing for a conventional loan (Fannie/Freddie) is up to 6 months, the 3 months mentioned above would be for certain non-conventional products.  Delayed financing will allow for you to pull out what you purchased the property for. But that is just one piece. You also have to stay within the loan to value requirements for your property type and occupancy. Assuming this a non-owner occupied ingle family home the max for a conventional loan would be 75% loan to value. For example, if you purchased the home for 150k and the property is worth 150k you could borrow 75% or 112,500.  However if the property is worth 200k, you could borrow 75% of 150k and get your cash back out.  If the property is worth 250k, you would be capped at 150k because that is what you paid for it. (well, 150k plus closing costs on the new loan) You would have to wait 6 months to be able to pull out the full 75% or 187,500 in that example.

Robin Simon · Answer

Yes - some lenders will do a "delayed financing" up to three months - but that clock is ticking.

If the goal is to recycle the capital to keep expanding (basic BRRRR strategy) - then you should probably look for a lender that can do the quickest / biggest cash-out refinance (most equity back as possible), and worry less about the cash flow or interest rate.

Best loan options today to pull money back out after purchasing SFH with cash?

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