Issue Came Up With Financing Just Before Closing

6 Replies

Hey All, this gets a little complicated so I'll try to explain clearly.

I purchased a duplex back in september w/ cash and did delayed financing with 70% LTV. Using those funds (and some others), I purchased a new primary residence for my family in December with cash, planning on doing delayed financing again. We are going to be renting out our current house once we move. I cleared this all up with my money guy beforehand to make sure we were all good and he said we're fine, he does this all the time. I just found out yesterday, the day before we're supposed to close, that the underwriter has an issue w/ it and we won't be able to close now until the money is seasoned, 6 months from when we closed on the duplex. He claims we're using borrowed funds to pay for the new house.

The new place is somewhat of a fixer upper so we have contractors to pay.  We have enough reserves to make it through, but it would be much more comfortable if we could get our cash out now.  

Does anybody have any opinions on what I could do?  Maybe go to a different lender?  I'm just worried that they would find the same thing.  

One thing my lender said we could do is close now on the new house, but then immediately pay off the duplex.  This would leave us w/ more than enough, but I would hate to go back in 6 months, refinance the duplex again, and have to pay all of the loan origination fees.

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@Andrew Merritt This is a tough one. I've been spinning my wheels, along with my lender, to figure out a solution to a problem similar to yours. The road block always seems to come back to using borrowed funds and having to season those funds, just like your situation. Good luck finding a solution to this! Hopefully someone can chime in to offer some insight.

Apply for a 1st lien home equity line.  

Perhaps have the lender that did the delayed financing write a letter stating you just paid cash and pulled the money back immediately. So it is not in fact borrowed funds. Include proof of funds prior to that loan and an LOE. This is where a long term relationship with your lenders comes in obviously but I think you should be able to sweet talk your way out of this issue.

@Matt Hoyt I am using the same lender that I used for my duplex back in September so he has all of the information.  We talked about this strategy before purchasing and he assured me that it would be no problem and he's done this before.  For whatever reason, the underwriter caught this at the last minute.  

@Bob Green how do 1st lien HELOC interest rates compare to regular mortgage rates? I'd also be hesitant to do this b/c interest on HELOC payments aren't tax deductible anymore (I think).

Originally posted by @Andrew Merritt :

@Matt Hoyt I am using the same lender that I used for my duplex back in September so he has all of the information.  We talked about this strategy before purchasing and he assured me that it would be no problem and he's done this before.  For whatever reason, the underwriter caught this at the last minute.  

@Bob Green how do 1st lien HELOC interest rates compare to regular mortgage rates? I'd also be hesitant to do this b/c interest on HELOC payments aren't tax deductible anymore (I think).

They aren't if you use HELOC to buy primary residence , but they are if you use HELOC to buy investment property. So maybe buy primary first. It is so much easier to open HELOC on primary and interest rates are lower. And use HELOC for duplex . I don't know how time sensitive your deals are. Just a thought .

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