Financing After Cash Purchase

[Patrick Kane]

I know everyone talks about lenders wanting seasoned MFH that is rented for 6-12 months before refinancing; however, are there rules of thumb for cash out financing/home equity loan on a cash purchase SFH? Looking at a SFH to rehab and rent out, but im wondering how long i need to assume before i go to the bank with my hand out. Logic would say the day i finish my renovations and the bank appraises the property is the day i can take out my money. Im banking on 70:30 LTV after i finish up my work, and would prefer to have my cash back with a fixed interest rate sooner rather than later. Thanks for the consideration.

[Andrew Postell]

@Patrick Kane @Sean Tagge is 100% correct on his description for a conventional loan. If you are buying with cash, or with a HELOC, you can do a cash out refinance on day 1 of owning the property. This is called a "Delayed Financing" loan. There is a really important rule to this loan type though and it is that you can get back either your purchase price + closing costs you had when you purchased the home OR 75% of the ARV....whichever is LOWER. Meaning whichever amount is the smaller amount is what you are allowed to get back in cash. So if you bought a home for $50k, put $10k into it and it's worth $100k...then the lower amount would be the purchase price + closing costs. On the flip side if you bought a home for $50k put $10k into it and it's worth $65k then the smaller amount is the 75% amount. @Darren Budahn I tagged you in case this was helpful info. 

You can of course get a portfolio/commercial loan that will ignore this rule and give you cash right away but you might be paying a higher interest rate, or a shorter term (like a 20 year mortgage or something), or it might be a variable rate...or even all three!  Anyway, if you have more questions then ask away.  If you think this post is helpful then please consider voting for it. Thanks!