“Delayed Financing” Mortgage : Pay Cash For A Home Today, Do Cash-Out Refinance Tomorrow
Paid cash for a home and want to take "cash out"? Now, you can.
Via a special Fannie Mae program known as Delayed Financing, U.S. home buyers and real estate investors are no longer required to wait 6 months post-closing to refinance a home bought with cash.
The standard 6-month seasoning requirement on cash-out refinances has been eliminated. You can now refinance your home within 24 hours of its purchase.
Fannie Mae's "Delayed Financing Rule"
Fannie Mae first introduced its Delayed Financing Rule in mid-2011. In part, the program was meant to help home buyer and real estate investors who were buying "unlendable" homes in foreclosure; and buyers required to close in a very short time frame.
Properties can be unlendable for a multitude of reasons.
With respect to foreclosures, the most common reasons why a home would be unlendable are linked to its habitability. Homes without running water, for example, are unlendable because no person should reasonably live there. The same is true for homes with broken windows, lead paint, or a busted roof.
Via Delayed Financing, a buyer can purchase a home with cash, make the necessary home repairs, and then perform a cash-out refinance on the home's existing equity.
This can be a simpler than purchasing the home outright using a construction loan program such as the FHA 203k.
Other times, cash deals are required to meet a seller's closing window.
For example, a home sold at auction may require full payment in cash within 7 business days but, in many states, by law, banks are not allowed to approve and fund mortgages in fewer than 10 days.
In these instances, the Delayed Financing program is a terrific fit. The home is bought with cash, and refinanced immediately.
Are You Eligible For Delayed Financing?
The Delayed Financing program has been widely available since 2011. Prior to its release, home buyers and real estate investors could not cash-out refinance a purchased home until six months had passed.
Today, the cash-out refinance process can begin immediately.
In order to qualify for Delayed Financing, you must only meet certain eligibility standards :
- The cash used for the original purchase must be documented to the bank
- The new loan size may not exceed the property's original purchase price
- A title search must show that no liens exist on the home
Furthermore, as a fraud-prevention measure, you must also show proof that the home sale actually occurred. The simplest way to prove that the home was sold is to provide your loan officer with the original HUD-1 document from the closing. The HUD-1 must show no evidence of a lien, and it must be signed by all parties.
Your lender will also verify that the original transaction was arms-length.
Mortgages via the Delayed Financing program are limited to 70% loan-to-value, and can be used for 1-unit, 2-unit, 3-unit or 4-unit homes. It can also be used with second homes, vacation properties, and rental units.
Delayed Financing is even available for buyers with more than 4 properties financed.
You Paid Cash At Closing, Now Get Your Cash-Out
The Delayed Financing Rule has helped the housing market forward and it's available for general use. Rates follow cash-out refinance pricing , and there are no additional "points" or fees due at closing just for using the program. Plus, closings are scheduled like "normal" refinances and the underwriting process is the same.
Not every bank will offer the Delayed Financing mortgage. Especially for investors using the 5-10 Properties program. It pays to shop around. Get started with today's low rates.