Wait time to refinance when using private lend first?

[Philip Tice]

Grandmother has no retirement. Looking to help her out and buy her house from her accomplishing two things: paying off her remaining balance of ~$30,000 on the mortgage, and giving her enough of a monthly annuity from my pocket so she can retire. I would allow her to live in the home for the rest of her life with no payment ($400/mo currently) and give her another ~$400/mo in an annuity type payment. This will help her AND give me a large sum of cash to use in other ventures. Just have a couple of questions.

I believe the property is lowball valued around $150k. I want to offer her about $60k for the property using a private lender, and then turn around and refinance for 80% of the value of the property. At $150k valuation, that’s $120k cash. Less the $60k plus a private lender fee, and I’m sitting around $55k cash.

1. I have a private lender interested, but I’m not sure what a good interest rate or fee would be since this is my first time using a private lender. I’ve seen 10-12% a lot but want confirmation on that versus a flat fee of say $3k.

2. How quickly am I able to refinance the property after I use the private lender, and should I get pre-approved before I sign a contract with the private lender?

[Andrew Postell]

@Philip Tice I'll just limit my comments here to the refinance step.  

Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.

For Fannie/Freddie you will need to own the property for 6 months before doing a cash out loan.  You will be limited to 75% of the property value.

For portfolio lending, there are plenty of lenders that don't have any waiting period...but as mentioned above the terms will be different.

So depending on what TYPE of a loan you can get prequalified will really determine what your loan will look like.  I hope this helps but feel free to ask anything additional.  Thanks!