Bought house cash, how long before I ncan take mortgage out on property with bank?

Question

Good afternoon, Bought a rehab all cash, almost done with improvements. How long do I have to wait before I can take out a mortgage on the house? Thanks

Mike V. · Answer

Most banks that are going to sell off the mortgage (fannie/freddie) will refinance you immediately but only for 70-80% of the original purchase price regardless of improvements/appraisals. If you want more than this then expect to wait 6-12 months. Best bet is with a local bank that will keep it in house - then the rules are far more flexible. This is all based on my experience of trying it several different ways over the last 18 months but the rules change weekly so call around and see what the story is this week.

Mike V. · Answer

Another avenue to consider is construction loans. I have used these for my last 3 deals. For example - I bought an REO for 28K and provided my lender with a list of 34K in repairs. They send out an appraiser with my list and he came back with a ARV of 100K. I had to put 20% of 28K down when I purchased and then the bank let me take draws on another 34K to rehab it. Rehab is over and the bank is allowing me to finance 70K (70% of 100K) with an in house loan. Plan is to refinance to a conventional 30 year after 6mo to a year. Yes, there is more transactional cost but I have only 5600 tied up in it during rehab and nothing now. Also during the construction loan period (up to a year) the payment is interest only so very little carrying cost.

Account Closed · Answer

The sitatuation here in Utah is bad from a lending perspective also. I own 8 rental homes, 4 are fully paid off and the 4 with loan have around $30KI equity apiece. I cannot get a refinance loan on the homes I fully own and neither can I get a pre-approval letter to buy more even though my credit and income is good. I have tried around 5 lenders and brokers both big and small. Things are pretty bleak.

Jon Holdman · Answer

Ah, that makes senses. OO loans are easier to get and have higher LTVs that NOO loans. I was going to ask what lender was willing to do a NOO 80% LTV loan.

Cory LaChance · Answer

Thanks Jon. That means a lot coming from you. I must say that this is my first deal and is also my primary residence. The mortgage guy told me if it were an investment property I am limited to 70% of appraisal value.

Jon Holdman · Answer

If you could borrow 80% of the appraised value after six months, you did very well. Congrats on both the deal and the loan.

Cory LaChance · Answer

A little update on this thread. I bought my house and did a total rehab with private money. I had to wait six months before any mortgage person would look at it to re-finance to get my money back out. I could only borrow 80% of the appraised value.

Steve Babiak · Answer

I have one, obtained in 2008, from a bank whose name would be very recognizable to all. And at that time I shopped for the HELOC at several other banks, many of who were willing to do the HELOC (and some would not). Somebody else posted they got one too. So the real point would be whether anybody could get one in today's banking environment; that I can't answer.

Jon Holdman · Answer

They would use the $145K (or an appraisal, if that's lower) as the value and then lend you 75% or whatever LTV they use. If their LTV is 75%, they would loan you $108,750. After one year, FDIC insured banks will use a new appraisal, so they would loan you (say) 75% of the $210K or $157,500. Assume "a bad day" is what you'll get. With some searching, you should be able to find a lender who will use a new appraisal after six months. I just completed a refi at about 4.5 months using a new appraisal. But then the lender called last week and said they needed to re-do the loan so that it funded after six months in order to get their investor to buy the loan. So, at least in my case, six months seems to be the minimum for a new appraisal. Even the one small(er) local bank I tried had the one year time limit to use the new appraisal.

Jim Wineinger · Answer

Cash out loans are nearly impossible. In order to make sure you are not doing this they will (in all likelyhood) require that you owe a legitimate bill and they will pay that for you as part of the mortgage. Such as purchase price (but you paid that in all cash, no bill there), construction costs (to avoid a mechanics lein), tax liabilities, ect. These amounts are going to be paid to the ones who could be in line in front of them (as far as position of their lein goes) and any extra cash that you do get will be minimal. If you do not have an existing debt that can be attached to the house chances are very low except in the case that you are living in that house and get a line of credit against the house. If it is an investment house, you are not living in it and therefore an HELOC is also nearly impossible.