Cash-out Refi Process

[Ken Bernstein]

Hello BP Nation,

My partner and I recently closed on a hard money loan to acquire additional properties, and are now working on the exit strategy. We have been purchasing properties since 8/13 and now own 23 units (16 fully rented). We will be using the hard money to rehab 7 units (3 properties). The properties were originally purchased with cash, but will now have a lien on them due to the hard money loan.

Being completely new to the cash-out refi process, I have the following questions:

1) Are banks requesting documentation such as: Rehab documentation (GC docs, permits, etc)?

2) Have you utilized a presentation when approaching Banks about a cash-out refi? If so, what type of information are you presenting?

3) What are typical seasoning requirements?

4) Average credit score requirements?

5 ) Avg LTV %?

6) Roadblocks when showing lien on property due to hard money loan?

Any other tips and suggestions would much appreciated!

Thanks in advance!

Ken

[Albert Bui]

Originally posted by @Ken Bernstein:

Hello BP Nation,

My partner and I recently closed on a hard money loan to acquire additional properties, and are now working on the exit strategy. We have been purchasing properties since 8/13 and now own 23 units (16 fully rented). We will be using the hard money to rehab 7 units (3 properties). The properties were originally purchased with cash, but will now have a lien on them due to the hard money loan.

Being completely new to the cash-out refi process, I have the following questions:

1) Are banks requesting documentation such as: Rehab documentation (GC docs, permits, etc)?

2) Have you utilized a presentation when approaching Banks about a cash-out refi? If so, what type of information are you presenting?

3) What are typical seasoning requirements?

4) Average credit score requirements?

5 ) Avg LTV %?

6) Roadblocks when showing lien on property due to hard money loan?

Any other tips and suggestions would much appreciated!

Thanks in advance!

Ken

HI Ken,

1) Yes they will ask for these to see what you've done on the properties depending if you're selling them as a flip to the end consumer or if you're retaining them as buy and holds they may not ask. It also depends on title seasoning if you've owned the property more than 12 months typically they will not ask since its considered long term at that point.

2) I am a lender and I work with investors and have done cash out's on various type of loan scenarios ranging from recent all cash acquisitions, waiting 12 full months to cash out all contributed equity in a deal, cash out consolidation loans, etc

3) seasoning requirements depends on what value you're trying to use if you want market value typically its 12 months if you want to cash out in under 6 months its max 70% of acquisition cost (includes purchase price and closing costs and potentially documented rehab costs), after 6 months to 12 months you can cash out on the lower of appraisal or acquisition cost but the difference is you can cash out up to 75% LTV on non owner SFr and 70% on 2-4 units (conventional financing)

4) 620 fico for conventional min average varies

5) shown in #3 answer if you want more details you can PM me or go to fanniemae.com to search

6) no lien seasoning time frames if thats what you're referring to

Let me know if that helped or if you have other questions.