Placing Rehab Costs on HUD-1

[Russell W.]

Hello everyone I have a question regarding delayed financing exception. My understanding is the purchase price and closing costs can be recouped on the cash out refinance. A lender has mentioned that if I was to put the rehab costs on the HUD-1, I would be able to recoup this money as well. However this would mean paying the contractor up front for everything. This obviously raises a huge red flag. Paying for 100% of the rehab before any work is done seems like a great way to send a contractor on a nice vacation. Has anyone been able to make this work or is a typical cash out refi with seasoning the only way to recap rehab costs?