Seasoning rules on non-financed properties - Why ?

Question

So I purchase properties for cash. I call my lender and ask to do cash out financing - no problem, lots of products available. But then I am told I have to season for 6 months. I know about seasoning for financed properties (eg first mortgage) but never expected to hear I have to season non-financed properties. I ask why ? Lender answer - "I dunno just the rules". Whose rules ? Why ?

Darren Eady · Answer

The opposite is actually true in some cases.  If you buy a property with cash, you cannot get your cash back out for six months to a year, without finding a lender that uses the delayed financing rule.  If you purchase a property with a private loan, you will be able to refinance your private loan immediately (Fannie, Freddie rules) on a rate and term refinance.

Please note that the new lender will not give you additional cash back or even use the higher appraised value of the property in the first year, but they will redo your private loan to a conventional loan without ANY seasoning requirement.  You can "negate" the one year "wait"

Charlie Fitzgerald · Answer

You can refinance using purchase price anytime within the 1st 6 months after acquiring the property under the Delayed Financing guidelines.  If you want to use new appraised value, you will need to wait a minimum of 6 months and in some cases 12 months.

Charlie Fitzgerald · Answer

@Bill Florence I would agree with finding a new lender.  The Delayed Financing program is a Fannie Mae program and is used a lot by investors that need to take down a property faster than they are able to finance it at acquisition.  My personal preference is to leverage my own capital with the use of a good HML partner and then roll all acquisitions into a portfolio loan later for long term hold.

Bill Florence · Answer

@Darren Eady  @Charlie Fitzgerald

Thanks. Was not aware of Delayed Financing option. Sounds like I need to find another lender, easy enough.

Seasoning rules on non-financed properties - Why ?

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