own property for 6 months to get cash out 30 yr mortgage?

6 Replies

Hello,

Newbie investor just purchased my second rental home.What I am doing is buying bank owned homes that need work (cash only sales). I use a HELOC to purchase the property and do all the repairs.I am fixing them up (myself doing the majority of the work subbing out big tasks).When I am done I get a cash out 30 year mortgage for what I have into the investment and pay back what I used on my HELOC. This is how I did the first house which needed extensive renovations and took me a year to complete.

The second rental house I just purchased using my HELOC needed minimal work and I was able to do all the repairs and I have a signed lease and the tenant is moving in 30 days after I purchased the house. I called my lender and he said fannie mae rules say I must have the property titled in my name for 6 months before I can get a cash out 30 year mortgage on it.

I was curious if others have ran into this problem and was curious if this is a true statement.

Thanks

Kevin

Call around to different lenders.  Ask about Fannie Mae's Delayed Financing Exception.  Or you could also go with a portfolio lender. 

The delayed financing rule will allow you to pull cash out based on a 75% LTV of the original purchase price. You'll have to wait the 6 months (or find a portfolio lender with different rules) if you want to use the new appraised value.

Originally posted by @Eddy Dumire :

The delayed financing rule will allow you to pull cash out based on a 75% LTV of the original purchase price. You'll have to wait the 6 months (or find a portfolio lender with different rules) if you want to use the new appraised value.

 He is exactly right.  Below is a link to the lending matrix for the Fannie Mae guidelines.  Now just because this is Fannie Mae's guidelines, doesnt mean the person originating the loan may have even stricter guidelines.  If they are stricter, I suggest just using a mortgage broker who can shop amongst many banks. I wouldnt use a portfolio lender until Ive maxed out my Fannie/Freddie borrowing capabilities.

https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf

@Kevin McDonald  If you bought your property with cash then you can get Delayed Financing. The financing will be based on the purchase price/appraisal. If you want to get a new appraisal then you will have to wait for 6 months.

Good luck.

Upen Patel
Mortgage Banker

Going to correct some comments above. Delayed financing exception you can get %75 (or 70% depending) of the appraised value up to %100 of your purchase price. You can't get any rehab cost in there. 

Example

 Purchase 75k

Rehab 10k

Appraisal 100k

They can give you a 75k loan. Must close within 6 months.  I just did one last month like this.  Not all lenders are familiar or knowledgeable about this.  @Jerry Padilla is and can set you up. 

Thanks for all the advice,

I think I will just wait out the 6 months and get the loan for everything I have into the property (original price, rehab costs, and loan costs) .

Thanks

Kevin

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