The Delayed Financing cash-out refinance program, often called the ‘Buy & Refi’ loan, was created for real estate investors who purchase homes with all cash and grants them an exception to qualify for a cash-out refinance just one day after buying the home.
Fannie Mae’s Delayed Financing program will help cash buyers avoid waiting the standard 6-12 month seasoning time frame normally required after buying a home in California, and can be used on investment properties as well as second/vacation homes and primary owner occupied residences.
Benefit of Delayed Financing for All Cash Purchase Real Estate Investors
- Gives a home buyer leverage in the negotiation process, possibly able to purchase the home at a lower price.
- Can close the transaction faster….typically 8-12 days…..faster than a buyer with traditional financing.
- Present less risk to a seller because they have no need for an appraisal.
- Gives your purchase offer a greater chance of being accepted, especially when there is a shortage of homes and multiple offer scenarios.
- Buying all cash, renovating the home, and using delayed financing is much easier than buying the home using an FHA 203K or HomeStyle renovation loan.
What To Do with Your Cash After Delayed Financing Refi?
- Home buyers can invest money that may get them higher returns than what they pay in mortgage interest….don’t laugh…programs are out there where this may be a reality….contact me if you need a Certified Financial Planner to discuss your options.
- Use cash to purchase another investment property and create even more cash flow
- Use the cash to replenish your personal reserves
Plan in Advance – Delayed Financing Qualifying Guidelines
- Delayed Financing must take place during the first 6 months after buying the property.
- A new appraisal value may be used but the loan amount cannot be more than the amount of the borrower’s initial investment in purchasing the property, including the financing of closing costs and prepaid fees.
- Purchase transaction must be documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The prelim title report must also confirm no liens on the subject property exist.
- Source of funds used for the purchase transaction must be documented. If borrowed funds or a loan was used to acquire cash for the purchase transaction, it must be repaid in full. Gifted funds that are not seasoned for two months in your bank account will prevent you from being able to do this delayed refi program. Call me for details.
- All other cash-out refinance guidelines and eligibility requirements still apply.
- The purchase transaction was an arms-length transaction.
A Delayed Financing cash out refinance is similar in interest rate, fees, LTV limits, LLPA adjustments, and origination process as any other refinance. You still have to qualify and document your income, reserves, and credit history…..no short cuts there.
Unfortunately, many banks still do not participate in the Delayed Financing refinance program and/or often charge a premium in higher rates or fees because they think these loans present more risk…….but we don’t.
If you want to consider buying a home all cash, as either an investment or your primary residence, and then take advantage of the delayed financing, contact me now or call direct (951) 215-6119.
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