Delayed Financing Cash-Out Refinance Mortgage Guidelines

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Delayed Financing Cash-Out Refinance Mortgage Guidelines

This BLOG On Delayed Financing Cash-Out Refinance Mortgage Guidelines Was UPDATED On May 5th, 2019

Home Buyers who purchase a home without financing and with cash and need to turn around to get a cash-out refinance mortgage, it is not as easy as they might think it is. Delayed Financing Cash-Out Refinance Mortgage Guidelines now applies.

  • Prior to the real estate and mortgage collapse of 2008, some real estate investors use to purchase a home cash to get the best deal and winning bid
  • They then turn around the next day and did a cash-out refinance mortgage
  • The proceeds were used to purchase their next property
  • Those days are long over
  • Delayed Financing Cash-Out Refinance Mortgage Guidelines now applies
  • There are mandatory waiting period after a home purchase
  • Mortgage Guidelines apply to do a rate and term refinance as well as a cash-out refinance mortgage

Delayed Financing Cash-Out Refinance Mortgage Guidelines On FHA Loans

FHA permits a homeowner to do a rate and term refinance mortgage after 6 months of a home purchase. Per Delayed Financing Cash-Out Refinance Mortgage Guidelines, it cannot be done with FHA Home Loans.

  • Homeowners can do FHA Cash-Out Refinance Mortgage but HUD requires mandatory waiting period requirments
  • Waiting period extends to a one year waiting period to do a cash-out FHA refinance mortgage
  • There is a mandatory 12 month waiting period to do a  FHA cash-out refinance from the purchase date of the home
  • The maximum amount that a homeowner can cash-out on a FHA insured mortgage loan is 85% loan to value
  • There are some lenders may require two appraisals on both a rate and term as well as a cash-out refinance mortgage loan
  • The homeowner cannot have been late on his or her mortgage payments in order to qualify for both a FHA rate and term refinance and/or cash-out refinance mortgage loan

Waiting Period For Delayed Financing Cash-Out Refinance Mortgage Guidelines

To do a cash-out refinance mortgage and/or rate and term refinance mortgage on a conventional loan, there is a minimum six month waiting period after the home purchase.

  • Six months of timely mortgage payments need to have been made by the homeowner
  • The conventional refinance mortgage lender may require two home appraisals
  • The maximum loan to value permitted on a cash-out refinance mortgage loan is 80% loan to value

How Delayed Financing Cash-Out Refinance Works

There is a conventional mortgage loan program called Delayed Financing Cash-Out Refinance.

  • Delayed Financing enables home buyers who paid cash for their homes to take out a cash-out refinance mortgage the minute they close on their cash real estate purchase
  • There is no waiting period or seasoning requirements with Delayed Financing

There are many advantages to being a cash home buyer.

  • With home prices rising and the lack of home inventory with homes that are listed getting multiple offers, home sellers gravitate towards cash home buyers
  • A cash home buyer has leverage over home buyers with mortgage contingencies and home sellers are willing more with cash buyers and willing to sell their homes for less to cash buyers
  • Home buyers who have access to cash such as a line of credit or investment account where they can borrow against it can buy a home with cash
  • They can then turn around the following day and do a cash-out refinance mortgage with the Delayed Financing Cash-Out Refinance Loans

Delayed Financing Mortgage Guidelines

There are cash-out restrictions with Delayed Financing Cash-Out Mortgage Loan Programs:

  • The maximum loan to value on the Delayed Financing mortgage loan program is capped at 70% loan to value
  • The delayed financing borrower cannot get a new mortgage via the delayed financing program greater than the purchase price of the property
    • For example, here is a case scenario
      if the home buyer purchased a home for $200,000 cash
    • the maximum amount the homeowner can do a cash-out refinance mortgage loan is $140,000
  • However, here is the second case scenario:
    • if the home buyer purchased a home for $100,000 cash
    • invested $100,000 in construction and rehab
    • got a final appraisal for $200,000
    • the maximum amount the homeowner can get on a delayed financing cash-out refinance mortgage loan is no more than $100,000
    • This is the case even though 70% of the $200,000 is $140,000
  • The clause with delayed financing is that the new loan amount cannot be greater than the purchase price of the home.

Mortgage Rates On Delayed Financing Mortgage Loans

All cash-out refinance mortgages have higher rates than rate and term refinance mortgage loan programs.  Delayed Financing cash-out mortgage loans are cash-out refinance loans so borrowers will take a pricing adjustment being a cash-out refinance mortgage loan.  Loan to value and credit scores will also play a role on what mortgage rates will be.

Related> When two appraisals are required

Related> Home purchase: When buying a flip

Related> Foreclosure: Buying a foreclosure

Related> FHA Mortgage Underwriting Guidelines

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