Put in an offer

[Scott W.]

This is from BofA. Close date 12/14. Cash purchase. Listed at $70k; they took an offer but fell thru. I was next in line at $55k. They countered at $68,800. The listing agent (who is also my agent) suggested stay at $55k, which I did.

About $15k 4-6 week rehab; rent comps $1300-$1350 Several non-distressed recent comps at $108k.

Can I get a refi in 6 months from a local bank?

[David Beard]

Scott W. -- you sound like a pretty good candidate for a conventional Fannie Mae loan (ie. 30yr fixed) under the Delayed Financing Rule, as long as you currently have less than 10 financed properties. Under this rule, if you purchase for cash, you can do the refinance using appraised value as soon as your rehab work is completed, even if it's just 30 days.

What's the catch? Very little really. For a SFR, the loan amount will be limited to the lesser of (a) 70% of the new appraised value and (b) your original purchase price + closing costs on the new loan. If you have between 4 and 9 loans already, then the LTV percentage used in (a) is reduced to 65%. Of course, the trick is to get the appraisal to come in strong enough to allow you to finance the (b) amount.

In your example, if you buy for $60K with cash, and you have closing cost of $2K on the new loan you take out, you will be able to finance up to $62K, as long as the appraisal comes in high enough such that 70% of the MV is at least $62K. If that's the case, you'd end up with a pretty good Loan-to-Cost ratio of around 80% ($62K/$77K).

If you want to use a new appraisal under standard cash out refinance rules, you will HAVE to have less than 4 financed properties currently, and you will have to wait 6 mths, per Fannie Mae guidelines (Freddie Mac is pretty much identical.). That is if you want the 30-year fixed rate stuff. Once you have 4 financed properties, the cash-out spigot is turned off. For a portfolio loan with a local bank or C.U. (not 30-year fixed), there is wide variability in what they'll do. You may find one that will let you cash-out refi with a new appraisal right after the rehab, but not likely. Some will let you refinance your purchase price+rehab very quickly. MOST will want you to hold the property for 6 mths to do a cash-out refi using a new appraised value.

When a local bank says they'll sell it to Freddie or Fannie, this only means that they have a department that originates loan for resell to the secondary market, acting just like any mortgage broker or mortgage banker. Almost all local banks do secondary market lending, as they earn very nice fees from the yield premium when they resell it.