First foreclosure contract - worried lending in 6 months

[Brad Crumpton]

Wife and I are recent entrants into REI. Bought our first property last year off MLS and turned it into a BRRRR project. Now looking for our 2nd. Got a contract on a USDA foreclosure on MLS, but it's really borderline on being a BRRRR property, even at current valuations. If values drop due to COVID, it would be difficult to get 100% of our money back in the refi.

I've heard that you have to wait 6 months from purchase to do the refi - is that true?  We did on our first one but I'm not sure if that was a lender-specific requirement or something else.  

How are lending rules impacted due to COVID and are they expected to stay that way long term?  

[Jaysen Medhurst]

@Brad Crumpton, most lenders have a 6-month seasoning period before they'll lend based on a new appraisal. That's pretty standard. You can refi sooner, but it will be based on the purchase price, not ARV. I have heard of exceptions, but very rare.

Lending standards are tightening and will probably continue to tighten. If you are in a good financial position, good credit, reasonable DTI, you should be fine.

What will the future hold? No one knows. I think rates will remain low. I think the Fed will make sure that the secondary market stays liquid so banks can continue to lend. Beyond that...

Establish and maintain strong relationships with your lenders. Stay in close contact. Make sure you know what they're requirements are when you start a project. That may well change, but you have to stay as informed as possible.