Delayed Financing Exception

9 Replies

Listened to Podcast again 233 last week, with Arianne Lemire. I am interested to learn more about this strategy. Can someone explain to me in greater detail how this works? What are the requirements? Can it be done with an initial loan to buy the property, then refi?

@Jeremy Rotert can you help us out with describing what is being talked about in that Podcast?  Were they describing how to get around delayed financing?  There is a lot to this subject.  

@Jeremy Rotert

I am doing this right now. I bought a property for $65,000 cash. A few days later I called a local bank and told them I wanted to do it. The loan officer looked it up (he didn't even think it was possible) and we are moving forward. He told me they could give me a mortgage of up to 70% the appraised value up to the purchase price.

The appraisal will take place near the end of November so I have about a month to get work done so it appraises well. If everything goes right I will get 100% of the cash I invested back minus the loan costs.

Arianne was speaking specifically about her first deal in real estate investing. She purchased a property for $50,000. She then was able to immediately take out a cash out refinance loan through Fannie Mae for 75% LTV. She then used that cash to fund another purchase. The initial property that she purchased was already rented to a long-term tenant, and was a cash flowing situation for her. This seems like a viable strategy, but I am having difficulty finding specific details on how it works, and what qualifies.

@AnthonyGayden

Can this be done using a loan to purchase the property initially (like hard money), or does it have to be cash?

Can this be done using a hard money loan for the initial purchase?

Originally posted by @Jeremy Rotert :

@AnthonyGayden

Can this be done using a loan to purchase the property initially (like hard money), or does it have to be cash?

 I am not sure about that. From what I had heard you have to have paid cash.

Originally posted by @Jeremy Rotert :

Can this be done using a loan to purchase the property initially (like hard money), or does it have to be cash?

If you use hard money, then you have a lien to pay off and I don't believe it fits in the realm of Delayed Financing anymore.  More like a Rate & Term refi.

@Jeremy Rotert Ah, ok, thank you for the help. I can certainly help with this. If you buy a home WITH cash, then you are allowed to receive a cash out loan. The "conventional" guidelines are that cash out loans are not permitted in the first 6 months of ownership....unless you purchase with cash or with a HELOC. If you did buy with cash or a HELOC then you can only receive back the cash that you used to buy the home itself. I did a pretty length post on this and I will include the link below. Feel free to ask more questions if you need. Thanks!

My post on this here:  Delayed Financing Post

From the source:

https://www.fanniemae.com/content/guide/selling/b2...

Click on Delayed Finance Exception.

"

The original purchase transaction is documented by a settlement statement, which confirms that no mortgage financing was used to obtain the subject property. (A recorded trustee's deed (or similar alternative) confirming the amount paid by the grantee to trustee may be substituted for a settlement statement if a settlement statement was not provided to the purchaser at time of sale.)The preliminary title search or report must confirm that there are no existing liens on the subject property.
The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).
If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down, as applicable, the loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction.Note: Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan.
The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value).

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