Delayed Financing Guidelines | Cash Buyer Delayed Financing Exception
Looking for cash out refinance options after paying for a property in cash? There are requirements for a delayed financing exception, but depend on agency guidelines. Borrowers who purchased a home within the past six months have options when it comes to cash out refinances.
Delayed Financing Fannie Mae
Traditional loans have set guidelines when it comes to requirements for a delayed financing exception. The transaction for the original purchase must have been an arms-length transaction.
The property must have been purchased as one of the following:
- A natural person.
- An eligible trust.
- A LLC or partnership, which borrower(s) have 100% ownership individually or jointly.
Acceptable documentation that confirms no mortgage financing was used for the original purchase transaction. There cannot be any liens on the property.
The funds must be sourced from the original purchase transaction. Examples include:
- Bank Statements.
- Personal documents.
- HELOC on another property.
When using an unsecured loan or loan secured by another asset, restrictions may apply.
Delayed Financing Freddie Mac
When you have not been on title of a subject property in the past six months, exceptions to the case are as follows:
You have inherited, or legally awarded the subject property.
Another delayed financing exception would be, acceptable documentation from the settlement agent reflecting that no financing was used to purchase the property.
- No liens on the property through a preliminary title report.
- Funds from the purchase were documented.
- Funds that were borrowed to purchase the property must be repaid and reflected on the closing disclosure for the refinance transaction.
Cash out loan-to-value restrictions must be met. There must have been no relationship between the buyer and seller of the original purchase transaction.
Other Investment Cash Out Options
There are options when personal debt-to-income ratios are an too high for cash out refinances for investment properties. The debt-service coverage ratio (DSCR) loan allows a property to qualify based on cash flow coverage versus the traditional loan – taking personal debt-to-income ratios into consideration.
Refinancing Seasoning for DSCR Loan
Pricing and terms vary depending on the following seasoning:
- Greater than 90 days 80% loan-to-cost.
- Greater than 90 days for the full appraised value.
- Have options with no seasoning requirements.