Delayed Financing Rule : Pay Cash For A Home, Cash-Out Refi Next Day
If you paid cash for a home within the last 6 months and want to take "cash out", you can. It's because of a new mortgage allowance named the Delayed Financing Rule.
The standard 6-month seasoning requirement on home purchases has been eliminated.
About The Delayed Financing Rule
The Delayed Financing Rule was introduced as part of Fannie Mae's Selling Guide update SEL-2011-05. Considering its impact on real estate investors, there was surprisingly little fanfare around its release.
Because of the Delayed Financing Rule, real estate investors can now pay cash for a home, then extract that cash immediately post-closing via a mortgage. Prior to the Delayed Financing Rule, there was a mandatory 6-month waiting period.
Today, there is no cash-out waiting period.
The Delayed Financing Rule qualifying standards are basic :
- The new mortgage may not exceed the documented property purchase price
- The original purchase must have been arms-length
- The original HUD-1 must document that the sale occurred
- The original HUD-1 must confirm that no financing was used
- A title search must show that no liens exist on the property
- Funds used for original purchase must be documented
Delayed Financing Rule mortgages are subject to a 70% loan-to-value limit except for investors with more than 4 properties financed.
For investors with more than 4 properties financed, the Delayed Financing Rule LTV limit is 65%, and other 5-10 Property Program restrictions apply, too.
You Paid Cash At Closing, Now Cash-Out
The Delayed Financing Rule was meant to for investors paying cash, but everyday homeowners can use the program, too. Mortgage rates are the same as for any cash-out refinance and there are no specific "points" or other fees added to the loan.
Closings are scheduled like "normal" refinances and the underwriting process is the same.
Not every bank will offer mortgages using the Delayed Financing Rule, though. Especially for investors using the 5-10 Properties program. Waterstone Mortgage does offer it, however.