All Forum Posts by: Obed H. Bey

Thanks for the mention @Jonathan Balog!  And @Obed H. Bey as the post mentions those are under the Fannie/Freddie guidelines. So if  you are using a different loan type then the rules might be different but what is mentioned above is what we practice to this day to help when purchasing a home with cash.  Thanks!

@Obed H. Bey, I have been doing exactly this.

Some lenders have a seasoning period of 6-12 months. If you refinance before that they may use the lesser of your purchase cost + rehab and the appraisal to establish the valuation.

So, for example lets assume buy for $20k and rehab for $20k ($40k all in) and the house appraises for $60k. If you refinance after only owning the house 3 months, you will likely only be able to get 75% LTV on $40k valuation or a $30k loan.

However if you wait til the seasoning period has passed for your lender 6 or 12 months from purchase, then you could refinance at 75% LTV of the $60k appraisal which is $45k. That is MORE than the $40k you have in the property.

Check with your lender to find out their requirements. So, that you can plan accordingly. Smaller community banks are where you want to look and speak with their commercial lending department. Most loans of this type are adjustable rate 15 or maybe 20 year loans with an initial rate lock period.

@Obed H. Bey Yes, you can definitely do it this way. I have some clients here in Connecticut that choose to purchase all cash so they do not have to pay the money associated with borrowing from a hard money lender. 

This may mean they can only do 1 project at a time as opposed to 2 or 3 if they were to use more leverage and they are fine with that.