Seasoning Periods when BRRRRing

Denver, Colorado
Creative Real Estate Financing
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Seasoning Periods when BRRRRing

Jon Ankenbauer
Parker, CO · Member since 2016 · 18 posts · 3 votes

I am looking to complete a BRRRR (is it still possible to do these??) and have started calling on local credit unions to discuss the refinancing portion of the transaction. In my most recent call I was told that if the original loan was secured using hard money then no seasoning period would apply since that is a Freddie/Fanny regulation. Is this true? Do seasoning periods only apply when using traditional financing?

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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 673 votes
3y

Your best bet is DSCR financing. You can do three month seasoning, but get better terms at six months.

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  • Logan Singleton
    Lender · Boston, MA · Member since 2023 · 415 posts · 95 votes
    3y

    It can also depend on the lender my previous employer wouldn't cash out anything regardless of where it was coming from unless you had owned the property for 12 months. With my new employer, we like to see a six-month seasoning period unless you use one of our fix & flip programs and then go into one of our rental vehicles then we can usually void the seasoning. 

    I'd be happy to discuss more and see if I can assist with the financing.

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  • Ryan Davies
    Investor · Salt Lake City, UT · Member since 2019 · 339 posts · 126 votes
    3y

    DSCR will be the best way to go unless you hold longer than 1 year.

    1Reply
  • Sarah HattonPro Member
    Lender · San Diego · Member since 2021 · 80 posts · 56 votes
    3y

    Hey Jon, 

    DSCR lenders typically have a 6 month seasoning requirement to refinance based off current value. There is one loan program that allows a refi sooner than 6 months, up to 75% LTV, not to exceed 120% of the original purchase price + documented rehab.

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  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    3y

    Depends on if you're talking about a conventional cash out or something like a DSCR loan. I'm assuming whoever you spoke with would be treating it as delayed financing - when you pay cash for a property, you can pull cash back out within 6 months, and the lender will use the purchase price to determine what you can pull. Conventional financing requires 12 months to use the ARV now, it used to be 6 months. If you go the DSCR route, requirements vary...most lenders require 6 months seasoning, others don't require seasoning if you can document the rehab.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y

    If you are doing a conventional cash out, the title seasoning requirement is 12 months. If you are doing a rate and term refinance there is no seasoning requirement. 

    On a DSCR cash out you may do it at 90 days title seasoning. Terms are slightly better at 6 months.

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 673 votes
    3y

    Your best bet is DSCR financing. You can do three month seasoning, but get better terms at six months.

    [email protected]860-538-3672
    ProAlpha Capital56 Reviews
    WebsiteView Page
    1Reply
  • Nick BelskyBusiness Member
    Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
    3y
    Quote from @Jon Ankenbauer:

    I am looking to complete a BRRRR (is it still possible to do these??) and have started calling on local credit unions to discuss the refinancing portion of the transaction. In my most recent call I was told that if the original loan was secured using hard money then no seasoning period would apply since that is a Freddie/Fanny regulation. Is this true? Do seasoning periods only apply when using traditional financing?

    For DSCR, there are a few with no seasoning period with proven rehab, a few with only 3 months seasoning, and many at 6 months.  Are you working with a mortgage broker?  Planning ahead is key when using BRRRR...

    Cheers!
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  • Jon Ankenbauer
    OP
    Parker, CO · Member since 2016 · 18 posts · 3 votes
    3y
    Quote from @Jay Hurst:
    Quote from @Jon Ankenbauer:

    I am looking to complete a BRRRR (is it still possible to do these??) and have started calling on local credit unions to discuss the refinancing portion of the transaction. In my most recent call I was told that if the original loan was secured using hard money then no seasoning period would apply since that is a Freddie/Fanny regulation. Is this true? Do seasoning periods only apply when using traditional financing?

    @Jon Ankenbauer   Is the CU saying that there is no seasoning because their portfolio program (meaning a loan kept in house) does not have a seasoning period?  OR, are they saying Fannie/Freddie does not have a seasoning period because you have a hard money loan as it sounds like you are saying above?  If the latter, that is incorrect.  IF there is any financing on the property you have to wait 12 months to use an improved value for a CASH OUT loan. 

    Fannie Mae cash out

    There is a workaround however: No seasoning cash out


     Thank you, Jay.  Yes, he was saying that because it was a hard money loan that there was no seasoning requirement.  From what I had read that didn't sound correct.  Thanks for the info.

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  • Jon Ankenbauer
    OP
    Parker, CO · Member since 2016 · 18 posts · 3 votes
    3y
    Quote from @Nick Belsky:
    Quote from @Jon Ankenbauer:

    I am looking to complete a BRRRR (is it still possible to do these??) and have started calling on local credit unions to discuss the refinancing portion of the transaction. In my most recent call I was told that if the original loan was secured using hard money then no seasoning period would apply since that is a Freddie/Fanny regulation. Is this true? Do seasoning periods only apply when using traditional financing?

    For DSCR, there are a few with no seasoning period with proven rehab, a few with only 3 months seasoning, and many at 6 months.  Are you working with a mortgage broker?  Planning ahead is key when using BRRRR...

    Cheers!

     Thanks, Nick.  I am not currently working with a broker.  I just started my journey to get financing details when I came across my question above.  Doing my due diligence to plan ahead as much as I can.

    0Reply
  • Jon Ankenbauer
    OP
    Parker, CO · Member since 2016 · 18 posts · 3 votes
    3y
    Quote from @Sarah Hatton:

    Hey Jon, 

    DSCR lenders typically have a 6 month seasoning requirement to refinance based off current value. There is one loan program that allows a refi sooner than 6 months, up to 75% LTV, not to exceed 120% of the original purchase price + documented rehab.

     Thank you, @Sarah Hatton. Sounds like I need to do a little more research. I am not familiar with the difference between DSCR and conventional lending. From the way your response was worded, I am guessing the loan programs offered may differ by the specific lender?

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Jon Ankenbauer:
    Quote from @Jay Hurst:
    Quote from @Jon Ankenbauer:

    I am looking to complete a BRRRR (is it still possible to do these??) and have started calling on local credit unions to discuss the refinancing portion of the transaction. In my most recent call I was told that if the original loan was secured using hard money then no seasoning period would apply since that is a Freddie/Fanny regulation. Is this true? Do seasoning periods only apply when using traditional financing?

    @Jon Ankenbauer   Is the CU saying that there is no seasoning because their portfolio program (meaning a loan kept in house) does not have a seasoning period?  OR, are they saying Fannie/Freddie does not have a seasoning period because you have a hard money loan as it sounds like you are saying above?  If the latter, that is incorrect.  IF there is any financing on the property you have to wait 12 months to use an improved value for a CASH OUT loan. 

    Fannie Mae cash out

    There is a workaround however: No seasoning cash out


     Thank you, Jay.  Yes, he was saying that because it was a hard money loan that there was no seasoning requirement.  From what I had read that didn't sound correct.  Thanks for the info.

     @Jon Ankenbauer Yes, they are incorrect. The only way to utilize the new value for a conventional loan is the double close I mention above. DSCR loan stands for Debt service coverage ratio loan. these ONLY look at the rent the subject property is generating. These can be a useful product BUT they typically cost more up front then a conventional loan, have a slightly higher rate but most importantly in todays interest environment is that they have pre-payment penalties. This can make refinancing very expensive when/if rates drop in the next few years which the bond market is predicting. So, understand ALL your options before you make a decision so make sure to speak with someone who has more then one option for you.

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  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    @Jon Ankenbauer We can go up to 75% LTV using the new appraised value for cash out with only 90 days of title seasoning (don't need 6-12 months).

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