6 Month Seasoning Period When Trying to Refi

[Evans Murray]

Hi BP!

I bought and rehabbed a property back in July 2019 and I financed the whole deal with my HELOCS. The property rented out after a couple of days on the market and I'm trying to do a cash out refinance so I can pay off my HELOCS and repeat the process over again. The lender I selected said that he could do the cash out refi and close in about 30 days. After paying for the appraisal and going through underwriting, my lender said that I will have to wait 6 months because of a Conventional rule called delayed financing. He also said that apparently this is a Freddie and Fannie guideline. I wish he would have told me before I paid for the appraisal. Anyways, I'm I met another lender that's saying he can do the refi without a seasoning period. I don't want to pay for another appraisal and have the same thing happen again. Does anyone know about a Conventional Rule called delayed financing? Also, since I practically did a cash purchase for the property, why would I have to go through a seasoning period? I appreciate all input in this matter. Thanks!

[Andrew Postell]

@Evans Murray very sorry that this has occurred.  It's always frustrating to hear a story like this...and you are certainly not alone.  I've been wrestling with how to answer this...mainly because I could write a book on this subject (and have tons of posts on it already) but I'll summarize with 2 points:

1. Lender Type - and how to choose a good lender
2. How to structure your cash purchases (and you should always avoid delayed financing)

1. Lenders - I almost want you to think of lenders like athletes.  If you ask someone, "can you play baseball"...most people would say "yes"...because they can play in your company inter-mural league.  But very few people can even be an amateur baseball player....and even less would be a professional.  Same with lenders.  They will all say "yes, I can do investment properties"....but most do about 1 investment property loan per 100.  And those lenders are no way our friends.  So how can you tell which lenders are any good?  How can you tell which ones are the professionals?  I've make a list of questions you can ask to see which ones are any good with investors:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?

Quiz your lenders on those questions to see how flexible they are with us as investors.

2. How to properly structure your cash purchases - I wrote an entire post that you can read HERE. It even outlines what the delayed financing rules are...and how you can avoid them.

I certainly hope some of this information helps.  Let us know if there's anything else we can help with.  Thanks!