Chattanooga Lenders With No Seasoning Requirement

[Jackson Malcolm]

Hey BP,

I recently completed the rehab and placed tenants for my first single family BRRR deal in Chattanooga, TN. Now it is time to refinance!

I have been hearing from lenders that it is a Fannie/Freddie requirement to wait 6 months from the closing date before refinancing, or it falls into the “delayed financing” category, where you can only get financing off of the house’s purchase price - not the new appraised value.

I purchased the property with cash, and am 100% fine to wait the 6 months and collect pure cash flow if I have to, but I have seen numerous stories in the BP forums of lenders that do not have the seasoning requirement.

My question is - Do any of you know of lenders who will do a 30 year, fixed rate refi that do not require 6 month seasoning? Any related advice on the refinance is appreciated as well, as this is my first venture into BRRR.

Thanks!

[Andrew Postell]

@Jackson Malcolm @Troy Miller and @George Randall so if you are speaking with a lender that will only base their loan on the purchase price then I would encourage you to seek another lender.  Now, maybe they said something different and it was lost in translation a bit but here's the things to keep in mind when buying with cash and using Fannie/Freddie loans.

• The "Cash Out" limit is 75% for single family homes and 70% for 2-4 units NO MATTER WHAT.  No matter whether you have delayed financing or not - 75% is the limit.  For example, if you purchased a property for $80k, put $5k into the property and it's worth $100k...then 75% of $100k is $75k.  What should NEVER happen is if a lender says that they won't take your AFTER REPAIR VALUE into consideration.  Meaning, if they are saying 75% of the PURCHASE PRICE...that is absolutely wrong and you should seek another lender right away.  Now, understand that a lender is allowed to put extra rules ON TOP of the Fannie/Freddie guidelines.  We call these extra rules "Overlays".  So when we target real estate investor friendly lenders we are really targeting lenders with no "overlays".
• Delayed Financing - Now here's where it can get confusion but it's really TWO options here.  If you purchase a property in cash you will get EITHER:
  • - 75% of the ARV (since that is the max anyway)....OR
  • - Your entire purchase price....WHICHEVER is LOWER
• So in this situation if you purchase very aggressively, you might be leaving some money in the property using Fannie/Freddie money.  As mentioned above, you can certainly use a commercial style loan (and there are some 30 year fixed rate commercial lenders out there) but working with a lender with no overlays on the Fannie/Freddie side is paramount

Sometimes when I type all of this out it might still not be 100% clear so feel free to ask any questions and I'll be here to help.  Oh, and I did write an entire post on how to avoid ALL of this that you can find HERE.

Thanks!