Delayed Financing Exception? Who has used this?

Question

I stumbled onto this strategy listening to a podcast and have been reading up on it. Can someone explain this to me? Because this is a game changer. Can you use this if you cash bought a house with Hard Money?

Annchen Knodt · Answer

@Breelon Bryant, it’s definitely a powerful tool, but can also be tricky so you want to make sure to do all your research and talk to your lender about the exact requirements. A few points:

• Per the Fannie may guidelines for the “delayed financing exception”, you can borrow up to 75% LTV, OR your initial purchase price (this can include closing costs), whichever is LOWER
• Lots of people have had success with including rehab costs on their HUD / closing statements, so that the second part of the above guideline isn't the limiting factor, enabling a BRRRR-type strategy without having to wait the full 6 month seasoning period. See this blog post for further details. It seems like other people have had issues doing this though so make sure you talk specifics with your lender!
• I don't think that it works on a house purchased with hard money, because the purchase has to be done with YOUR funds, not a loan from someone else. I actually had a delayed financing application fall through bc I was applying for the refi in my name, but the house was purchased with funds in my partnership's bank account.
• Alternatively, you may be interested in another creative strategy for doing a cash out refi without waiting 6 months, described here

Hope this helps!

Chris Mason · Answer

No, it's for cash buyers only. Actual cash buyers, not "I got a HML and convinced the seller it was cash" buyers. :)

If you pulled financing on ANOTHER property (cash out refi, HELOC, etc), that does count as a cash buyer. Pulling equity out of a different property is viewed no differently than pulling money out of a savings account.

Denver J Lobo · Answer

@ Trevor Aydelott, Did you manage to figure out how you got your Rehab costs onto your HUD?

Trevor Aydelott · Answer

Like @Chris Mason said. It has to be your cash for delayed financing.

The one thing now that you got all this information is now figure out how you get REHAB costs put onto the HUD1

This is my next goal as I'm doing a delayed financing right now. So hopefully my next deal I can figure it out.

Breelon Bryant · Answer

@Stephanie Medellin thank you. This helped

Breelon Bryant · Answer

@Annchen Knodt it really did. Thanks

Breelon Bryant · Answer

@Chris Mason ok got it. Thank you chris

Stephanie Medellin · Answer

@Breelon Bryant Delayed financing is only for getting your money back after purchasing with cash. You're "delaying" getting financing.

There is no waiting period to refinance a hard money loan into conventional. However you will not be able to take additional cash out within the first 6 months. So if you purchase with a hard money loan for $200,000, you can refinance the $200,000 loan the next day, but you can't get a loan for $250,000 with $50,000 back at closing until 6 months have passed.

Even though there's no waiting period, you would have to clear up whatever issue(s) prevented you from getting a conventional loan to purchase in the first place.

Delayed Financing Exception? Who has used this?

Delayed Financing Exception? Who has used this?

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@ Trevor Aydelott, Did you manage to figure out how you got your Rehab costs onto your HUD?