HUD delayed financing exception in OKC

29 Replies

Hey guys!

I read this article(link below) by @Andrew Syrios and I have talked to several lenders that I know in the area about this. None of them have any experience with this or have even heard about it. The premise is that with the delayed financing exception, you can pull 100% of your purchase + rehab costs back out without waiting the 6 month seasoning period up to 75% LTV. Has anybody in the OKC market used this strategy? Any recommendations for lenders or loan officers that are familiar and comfortable with this strategy?

https://www.biggerpockets.com/renewsblog/work-with...

FYI, that article isn't by me and I haven't heard of this exception. I'll look into though as it sounds interesting.

@Alexander Felice he's still a regular poster here and could chime in on this. I doubt the lender has to be local for this. Were you able to get a hold of Steve? Curious as to what he had to say.

@Jimmy Martz  

I've been looking into this myself.  The delayed financing exception is part of  Fannie Mae's Cash-Out Refinance program.  There are several boxes to check with the most important being that you have paid cash and no liens are associated with the property and you can document where every single dollar came from to purchase it.  Also if a gift was used to buy the home, you can't get that portion refinanced.

I've talked to several lenders and they generally aren't aware of this option or have done them rarely.  But here are all the details straight from the horse's mouth: https://www.fanniemae.com/content/guide/selling/b2...

The article you reference mentions rehab costs being included in the refinancing but that's not listed in the Fannie guidelines: "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."

@Shekeira Ward Putting my attorney hat on (member of the Massachusetts bar), I interpret "initial investment" as meaning purchase price since "in purchasing the property" immediately follows.   Rehab costs would come after closing while all of the allowable items are paid at closing (closing costs, prepaid fees, and points).  I'm not an underwriter but my best guess is that rehab costs would not be allowed to be rolled into the cash-out refi.

Update: i found a lender that said he could do it but it turns out, he was unable to get it done. After Ifound iut that he coukdn't close inside the 6 month seasoning window, My option was to do a 75% loan after the 6 month seasoning period or start over. I chose to wait and get the loan closed with him as opposed to starting over with paperwork, appraisal costs and another hard pull on my credit if I chose to change my lender. My closing is supposed to be tomorrow but I found out today that the lender tried to submit my loan to the underwriters as a SFR(its a duplex). This change caused me to have a $2,400 charge to maintain my current interest rate AND they will now only do a 70% LTV loan. Those 2 things changed my cash-out amount by over 12k. Not too happy about this process. If anyone finds someone who actually can pull off the delayed financing exception, please post but this didn't work out so well for me...

 Live & learn :-)

First, I'm offended that OP would confuse me with @Andrew Syrios

ok here is the deal, I have PERFECTED this process and while it is tricky, it's possible to extract 100% of your funds from a deal with no seasoning (minus transaction costs). 

the key here is 3 things: 

1. your ALL-IN cost needs to be 75% of the ARV, because you're going to get a loan for 75% LTV. if you have more than that in the deal, there is no chance. Less is fine, but you'll be leaving money on the table. 75% is perfect

2. you must get an invoice for the contract work and your insurance costs and put them on the HUD-1 with your title company (have them put it way down at the bottom on the 2nd page or as an addendum). Then you'll pay the ENTIRE amount of the purchase and rehab and insurance all at once.

3. you must pay this total amount in YOUR FUNDS. sorry, no hard money, no loans, no borrowed money. They lender will be required to source the funds and it has to be all your money (401k/Heloc are COOL!). Once the total amount is on the HUD-1 and it's paid for, the title company will send out the checks for rehab, and the INSTANT you have a tenant in the building (they will check at appraisal per guidelines) and a signed lease, you can start underwriting.

I have done this multiple time, and the quickest one was completed in a tad over 8 weeks (that's from the day I paid in full, to the day I received all my funds back)

the one big caveat seems to be finding lenders who will participate in this. Instead of telling them your whole process, it might be easier to just ask them if they can do delayed finance and will they finance 100% of what's on line HUD-1 line 120. Then you don't have to explain all the details, though my best practices recommendation is find a lender who really knows this process and is willing to help. There is nothing lender specific about this program, it's all fannie mae so very standardized.

I hope this helps. I know this process can seem a bit  detail intensive at first so I'm always around to help answer questions. 

Originally posted by @Wayne Warren :

I'm sorry, Alex.  What do you mean by "they will check at appraisal per guidelines) and a signed lease, you can start underwriting.?   

What do you mean by the bolded words I've underlined?

the loan requires a tenant to be in place. So you'll have to provide a signed lease, and when the appraiser comes out to check the place, he's' going to make sure someone lives there. Underwriting can't finalize the deal until this is complete. 

Originally posted by @Alexander Felice :

First, I'm offended that OP would confuse me with @Andrew Syrios. 

ok here is the deal, I have PERFECTED this process and while it is tricky, it's possible to extract 100% of your funds from a deal with no seasoning (minus transaction costs). 

the key here is 3 things: 

1. your ALL-IN cost needs to be 75% of the ARV, because you're going to get a loan for 75% LTV. if you have more than that in the deal, there is no chance. Less is fine, but you'll be leaving money on the table. 75% is perfect

2. you must get an invoice for the contract work and your insurance costs and put them on the HUD-1 with your title company (have them put it way down at the bottom on the 2nd page or as an addendum). Then you'll pay the ENTIRE amount of the purchase and rehab and insurance all at once.

3. you must pay this total amount in YOUR FUNDS. sorry, no hard money, no loans, no borrowed money. They lender will be required to source the funds and it has to be all your money (401k/Heloc are COOL!). Once the total amount is on the HUD-1 and it's paid for, the title company will send out the checks for rehab, and the INSTANT you have a tenant in the building (they will check at appraisal per guidelines) and a signed lease, you can start underwriting.

I have done this multiple time, and the quickest one was completed in a tad over 8 weeks (that's from the day I paid in full, to the day I received all my funds back)

the one big caveat seems to be finding lenders who will participate in this. Instead of telling them your whole process, it might be easier to just ask them if they can do delayed finance and will they finance 100% of what's on line HUD-1 line 120. Then you don't have to explain all the details, though my best practices recommendation is find a lender who really knows this process and is willing to help. There is nothing lender specific about this program, it's all fannie mae so very standardized.

I hope this helps. I know this process can seem a bit  detail intensive at first so I'm always around to help answer questions. 

Being confused with me should be considered a mark of great honor! : ) 

 When I was researching this, I spoke with a dozen different lenders  and none of them knew about this strategy. I even asked @Alexander Felice  for the contact info for the lender he uses.   He was very willing to help and gave me this contact info but this person didn’t do business in Oklahoma. However, they gave me a few references for other lenders. After following the trail on those references, I found someone that said they could do it.   It didn’t work out and those details are above.   Here’s my reasons for the post:   

     1.) Where are all of the lenders and mortgage brokers on BP & Why are none of them commenting on this strategy?  

2.) My updated post was 5 months ago and not 1 person posted anything here related to their success with this strategy.  

I’m left wondering if this is a strategy to continue to pursue or if Alex has just found a lender that has an extremely flexible interpretation of fannie mae’s language.   I’m definitely interested in hearing from the wisdom of the community on this.  Thanks. 

Alex,  What is the contact info for lenders in the Dallas, TX area that will work with this scenario (cash buyer plus 75% delayed financing)?  If the lender that will do this for you is your employer, will they do this in my area of the country?

Originally posted by @Alexander Felice :
Originally posted by @Wayne Warren:

I'm sorry, Alex.  What do you mean by "they will check at appraisal per guidelines) and a signed lease, you can start underwriting.?   

What do you mean by the bolded words I've underlined?

the loan requires a tenant to be in place. So you'll have to provide a signed lease, and when the appraiser comes out to check the place, he's' going to make sure someone lives there. Underwriting can't finalize the deal until this is complete. 

Alexander,

I am looking on there website to find a little more information about rates/terms for their Cash Out Refi program. I am actually purchasing a house right now that will most likely qualify for this but there website is not the most intuitive so as one who has done it before I was hoping you could maybe guide me to more information.

Jared

Originally posted by @Wayne Warren :

Alex, I'm looking at the BRRR calculator. When you get your loan in BRRR essentially you've put no money down to get the loan. Doesn't the monthly P&I eat you up?

It can if the rent-to-cost ratio is not good. I own my homes for ~65k and they rent for an average of 900, so the PITI leaves me with decent cash flow. If I had no loan my cash flow wuold be a lot better, but my return on equity would be trashed. Everything is a tradeoff

Originally posted by @Wayne Warren :

Alex,  What is the contact info for lenders in the Dallas, TX area that will work with this scenario (cash buyer plus 75% delayed financing)?  If the lender that will do this for you is your employer, will they do this in my area of the country?

I don't know anyone in Texas unfortunately. 

I work at a bank but I work with SBA loans, not residential mortgages. Sorry

Originally posted by @Jared McCullough :
Originally posted by @Alexander Felice:
Originally posted by @Wayne Warren:

I'm sorry, Alex.  What do you mean by "they will check at appraisal per guidelines) and a signed lease, you can start underwriting.?   

What do you mean by the bolded words I've underlined?

the loan requires a tenant to be in place. So you'll have to provide a signed lease, and when the appraiser comes out to check the place, he's' going to make sure someone lives there. Underwriting can't finalize the deal until this is complete. 

Alexander,

I am looking on there website to find a little more information about rates/terms for their Cash Out Refi program. I am actually purchasing a house right now that will most likely qualify for this but there website is not the most intuitive so as one who has done it before I was hoping you could maybe guide me to more information.

Jared

what questions do you have? how much have you read on BRRRR strategy? do you have a lender lined up?

Originally posted by @Alexander Felice :
Originally posted by @Jared McCullough:
Originally posted by @Alexander Felice:
Originally posted by @Wayne Warren:

I'm sorry, Alex.  What do you mean by "they will check at appraisal per guidelines) and a signed lease, you can start underwriting.?   

What do you mean by the bolded words I've underlined?

the loan requires a tenant to be in place. So you'll have to provide a signed lease, and when the appraiser comes out to check the place, he's' going to make sure someone lives there. Underwriting can't finalize the deal until this is complete. 

Alexander,

I am looking on there website to find a little more information about rates/terms for their Cash Out Refi program. I am actually purchasing a house right now that will most likely qualify for this but there website is not the most intuitive so as one who has done it before I was hoping you could maybe guide me to more information.

Jared

what questions do you have? how much have you read on BRRRR strategy? do you have a lender lined up?

 Alexander,

My questions were focused on what there interest rates and terms were as based on what I am understanding is this is some special program offered through Fannie Mae. The house is a cash purchase which I am looking to CORF on as soon as I close and get a renter in. I have a current lender at a 15 year 5.6% Commercial Loan but if I can get better rates doing as you are suggesting I am very interested. 

Originally posted by @Jared McCullough :
Originally posted by @Alexander Felice:
Originally posted by @Jared McCullough:
Originally posted by @Alexander Felice:
Originally posted by @Wayne Warren:

I'm sorry, Alex.  What do you mean by "they will check at appraisal per guidelines) and a signed lease, you can start underwriting.?   

What do you mean by the bolded words I've underlined?

the loan requires a tenant to be in place. So you'll have to provide a signed lease, and when the appraiser comes out to check the place, he's' going to make sure someone lives there. Underwriting can't finalize the deal until this is complete. 

Alexander,

I am looking on there website to find a little more information about rates/terms for their Cash Out Refi program. I am actually purchasing a house right now that will most likely qualify for this but there website is not the most intuitive so as one who has done it before I was hoping you could maybe guide me to more information.

Jared

what questions do you have? how much have you read on BRRRR strategy? do you have a lender lined up?

 Alexander,

My questions were focused on what there interest rates and terms were as based on what I am understanding is this is some special program offered through Fannie Mae. The house is a cash purchase which I am looking to CORF on as soon as I close and get a renter in. I have a current lender at a 15 year 5.6% Commercial Loan but if I can get better rates doing as you are suggesting I am very interested. 

not a special program at all, but it is niche because the requirements to qualify are so strict. 

fannie mae doesn't give out rates, they just help banks get a guarantee for loans. the rate is going to depend on the bank (kinda) and 5.6% is pretty much market rate right now. the fannie mae loan will allow you to get a 30 year term, but if you want a 15 year your current option might be the same or easier.