Refi on Owner Financing

[Daniel Fisher]

I purchased a house in October on seller financing.
Since then I have rehabbed and rented out the house. 

Purchase price- $80,000

Rehab cost - $20,000

ARV - $140,000

I am wanting to cash out refinance and pull out some of my rehab costs and get the financing with a real lender. 

Is there a timeframe in which I must wait to refi? Also are there any suggestions on where to refi to? 
I keep hearing everyone say they got a 30 year fixed at a great interest rate, but all the banks I talk to want to put me on a commercial loan with crazy terms. 
This is my fist deal and any advice would be appreciated!

Thank you,

Daniel Fisher

[Andrew Postell]

@Daniel Fisher a lot to answer here but essentially is comes down to what type of loan you can qualify for.  

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.

So if you want to get that low rate Fannie/Freddie loan you have to make sure you qualify for it.  Getting prequalified ahead of time usually helps with answering this before you commit to a property but you can certainly take the time now to try.  Reach out to some traditional lenders and see if you can qualify for their loans.  Report back and let us know how the progress is going and maybe we can help further.