Buying Home Cash And Refinancing Afterwards To Get Better Deal
This BLOG On Buying Home Cash And Refinancing Afterwards To Get Better Deal Was PUBLISHED On May 8th, 2019
It is no secret that home sellers tend to accept a cash offer by home buyers.
- Often times, sellers will give cash buyers a better deal than buyers with mortgage contingencies
- Home buyers with less and/or no contingencies often are favorites of home sellers and listing realtors
- The real estate market is hot
- There is more demand for homes than inventory
- Cases of multiple purchase offers are common throughout the United States
- One way of getting the winning bid on multiple bidding wars is by buying home cash with little and/or no contingencies
In this blog, we will discuss Buying Home Cash And Refinancing Afterwards To Get Better Deal.
Buying Home Cash To Get Winning Bid
The main reason home sellers like home buyers who are buying home cash are because of the following reasons:
- Fast closings
- Little to no contingencies
- No worries about home appraisal coming in low
- Many cash home buyers will purchase the home as is with no home inspection contingencies
- No finance contingencies
- Earnest money being non-refundable
In lieu of no mortgage, appraisal, home inspection, earnest money refund contingencies, home sellers will often accept the buyer who is offering a cash offer. They will also offer a lower price with cash home buyers. As long as home buyers can show proof of funds and a super fast closing, the seller will most like accept a cash offer versus an offer with several contingencies.
Cash-Offers On Home Purchase
Cash offers are not common with owner-occupant primary homes.
- Most primary home buyers do not have the cash in hand to purchase their primary homes without getting a mortgage
- However, during a hot housing market with multiple offers, many home buyers want to get creative to get the winning bid
- Buying home cash often an option in getting the winning bid
- Creative home buyers often consider borrowing the cash from family, friends, relatives, business associates, and/or hard money lenders and doing a cash-out refinance as soon as closing on their home loan
- Unfortunately, doing a cash-out refinance right after closing their home loan with cash is not as simple as it sounds
We will discuss doing a cash-out refinance on a home after buying home cash and the obstacles borrowers will run into.
Using Hard Money Loans To Purchase Homes
Hard money loans are only allowed to purchase investment properties and not owner-occupant homes.
- Investment real estate is not regulated
- Owner-occupant primary homes are
- Mortgage disclosures and RESPA does not apply on investment properties but does apply with owner-occupant primary homes
- Hard money lenders normally require 20% to 50% down payment by borrowers
- Interest rates on hard money loans are north of 10%
- Pre-payment penalties are prohibited on primary owner-occupant properties
- Pre-Payment penalties are allowed on investment real estate
Hard money lenders who lend on primary residential homes are violating RESPA and/or federal/state mortgage laws.
Refinancing With FHA Loans After Buying Home Cash
HUD, the parent of FHA, requires a six month waiting period after the closing of a home loan for borrowers to qualify for a rate and term FHA Loan.
- The waiting period extends to a 12 month waiting period for a cash-out FHA Refinance Loan
- Borrowers who borrow money from outside sources need to be careful in buying home cash with borrowed money and promising the investor they will pay them back right away
If the home buyer only qualifies for an FHA Loan and need to do a cash-out refinance after buying home cash, they need to wait 12 months.
Fannie Mae And Freddie Mac Guidelines On Cash-Out Refinancing After Buying Home Cash
Fannie Mae and Freddie Mac Guidelines on Cash-Out Refinancing on conventional loans require a six month waiting period after the original home purchase.
- Both cash-out and rate and term refinancing guidelines on conventional loans are six months from the original home purchase date
- Home buyers who intend in refinancing after buying home cash need to wait six months
NON-QM Loans are alternative mortgage programs. Many borrowers who do not qualify for government and conventional loans can qualify for non-qm loans. NON-QM Loans are ideal for borrowers with the following:
- Recent bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- Recent late payments in the past 12 months
- Borrowers who need to use asset-based lending
- Self-employed borrowers with little or no income declared on their income tax returns
- Home buyers who need higher loan limits than government and/or conforming loan limits
NON-QM Loans are for both purchase and refinance transactions. Borrowers can qualify for non-qm cash-out refinance mortgages six months after purchasing their property on owner occupant properties and 12 months on investment properties. Maximum cash-out loan to value on non-qm loans is 80% LTV.
Michael Gracz, National Sales Manager at Gustan Cho Associates, is one of the country’s leading non-qm experts. He issues the following statement on non-qm financing:
Conventional banks and traditional lenders are notorious for being very rigid. They are known for having arbitrary rules and regulations that prevent borrowers from obtaining loan approval. While non-qm lenders do have criteria a borrower must meet to be approved, it is significantly less than what is required for a bank loan. NON-QM Lenders are much more likely to work through an issue with a borrower and to offer a creative solution that satisfies all the involved parties. Working with a non-qm lender is a partnership. The non-qm lender wants the project to go as smoothly as possible, just as the real estate investor does. The last thing the lender wants is missed payments, unforeseen issues with the property, or any other potential problems that put the project in jeopardy. A reliable and experienced non-qm lender analyzing a loan request or project will give their honest opinion and bring up any issues that could jeopardize the project. The lender may bring up concerns the real estate investor was not aware of that could potentially hurt the project if not addressed. The advice from the non-qm lender could also cause the real estate investor to reconsider moving forward with the subject property altogether in order to avoid taking a loss on the project