Delayed Financing: Based on Purchase Price or Appraised Value?

[Eric Helder]

Hey everyone,

Brand new to real estate investing here (and in the process of buying my own personal home), but I've already discussed some future financing options with lenders. One option that came up is delayed financing, which sounds great, but one part confuses me. My lenders both stated they would do delayed financing based on 75% of cash purchase price of single-family investment home. So, you get the benefit of a quick mortgage but only get 25% of your investment back.

However, in reading about delayed financing here and other places, I've seen others say that delayed financing is either the lower of the purchase price OR 75% of the appraised value. So buying a property at its appraised value, you'd only get back 75% of your purchase price. But if you bought a property at 75% of market value, you could in theory get back 100% of the purchase price.  A few questions:

1. Am I reading that correctly? Fannie Mae guidelines state: "The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value)." That would lead me to me to believe that it can in fact be based of appraised value, however both of my lenders seemed pretty clear that their delayed financing is 75% of my purchase price, and they didn't mention appraised value.

2. I've also seen people claim they wrap rehab costs into the HUD-1. That would allow delayed financing to be based on purchase price (including rehab) OR 75% of ARV (which is higher due to rehab), meaning the potential exists to pull out 100% of purchase price PLUS rehab. Correct?

3. What's the process for adding rehab costs to HUD-1 (if that is in fact possible)? If I buy property through county foreclosure auction, does that leave any opportunity to add rehab costs to HUD-1?

Really appreciated any and all insight as I look into these creative way to get into property investing! Thanks!