Using conventional financing as my exit strategy?

3 Replies

Say I use a hard money lender to get my foot in the door of an REO, once it's rehabbed, I put it back on the rental market. (As my exit strategy from the hard money loan) If I use conventional financing to get a refi, would I still have to put 20% down payment on the refinance, or do banks treat that situation differently because it is already in my name?

@Kevin Porter the loan process and qualifications are the same regardless of if you are buying the home or you already own the home. If you buy the house using cash with a HML lets say for $50k and put in $25k and the ARV is $100k the bank will allow you to put a loan on (20% - 25% down depending on the asset class) the $100k after 6 months.

I caution you, if you are going to use this strategy, make sure you qualify with a bank on the ARV before buying it. Otherwise you are stuck with a very expensive and mad HML

Also make sure of your banks seasoning requirements.  Some banks make you own a property for 6-12 months before your eligible to refi.  

I agree with @Brie Schmidt   make sure you can qualify for a conventional mortgage prior to your purchase. 

@Kevin Porter If this is house number 1-4 you can refinance and get a mortgage based on appraised value after 6 months. You can cash out or just refinance. A single family is 75 percent LTV and a multi family is 70 percent LTV. If you owe more than that to the hard money lender than you could still do a rate and term refinance. If this is property 5-10 than you would have to refinance prior to 6 months up to the purchase price of the property to cash out with the same LTV as above. You could also do a rate and term refinance at any point.

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