Tenants in SF and Oakland regularly show up at open houses with all documents in hand, checkbooks/cash w/ prepaid rents and big deposits, etc..

@Jennifer S. this is what I've seen on Fannie Mae Delayed Financing Exception:The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value).If your lender is refinancing both purchase and rehab, do you know if that's a portfolio loan they keep in house?  

There is no limit on prepaid rent. 

If it ISN'T deductible, I would look at a 5% down conventional mortgage with prepaid MI buyout.

Can someone "explain like I'm five" the prepaids, escrow, and fees sections?

@Ed Maione For a standard SFR, we normally see about $6,000, plus home inspection and the wild card, pre-paid taxes and insurance.Unless you're in a very high tax area, $15,000 seems high. 

I have heard of people using pre-paid legal services.

Refinance costs can be lower because you don't have prepaids (if you are escrowing your insurance and taxes), and banks will usually lower their origination fee, title fees.

But that’s also true of homes sold to anyone else as well.The frills like gift cards and a TV and gift baskets and prepaid cable are unlikely to move any sort of needle.

Here is the quote from that document:"Therefore, any prepaid funds held to secure future rents are considered to be a part of the security deposit.