Cash-Out Refinance Mortgage

Delayed Financing

Gustan Cho Associates

If you were to purchase a home cash and want to turn around and get a cash-out refinance mortgage, it is not as easy as you might think it is.  Prior to the real estate and mortgage collapse of 2008, many real estate investors use to purchase a home cash and turn around the next day and do a cash-out refinance mortgage the next day and use the proceeds to purchase their next property.  Those days are long over and there are mandatory waiting period after a home purchase to do a rate and term refinance as well as a cash-out refinance mortgage.

Waiting Period For Cash-Out Refinance With FHA Loan

FHA permits a homeowner to do a rate and term refinance mortgage after 6 months of a home purchase.  However, the 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 cash-out refinance FHA mortgage loan 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.  Some FHA mortgage lenders may require two appraisals on both a rate and term refinance mortgage 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 mortgage loan as well as a cash-out refinance mortgage loan.

Waiting Period For Cash-Out Refinance Mortgage With Conventional Loan

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.

Delayed Financing: Refinance Mortgage Less Than Six Months After Home Purchase

There is a conventional mortgage loan program called Delayed Financing where it 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 of 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 and turn around the following day and do a cash-out refinance mortgage with the Delayed Financing mortgage loan program.

Delayed Financing Mortgage Loan Program

There are cash-out restrictions with Delayed Financing 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 mortgage loan borrower cannot get a new mortgage via the delayed financing program greater than the purchase price of the property.  For example, 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, if the home buyer purchased a home for $100,000 cash, invested $100,000 in construction and rehab and 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 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 mortgage loans have higher mortgage rates than rate and term refinance mortgage loan programs.  Delayed Financing mortgage loans are cash-out refinance mortgage loans so the mortgage loan borrower will take a price adjustment being a cash-out refinance mortgage loan.  Loan to value and credit scores will also play a role on what the delayed financing mortgage loan borrower’s mortgage rates will be.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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