Investors can buy in cash to get best deal and then Cash-Out with new Delayed Financing Rule

By mark-slade November 30, 2011

Delayed Financing Rule : Pay Cash For A Home, Cash-Out Refi Next Day

Delayed Financing Rule for mortgagesIf you paid cash for a home within the last 6 months and want to take “cash out”, you can. It’s because of a new mortgage allowance named the Delayed Financing Rule.

The standard 6-month seasoning requirement on home purchases has been eliminated.
About The Delayed Financing Rule

The Delayed Financing Rule was introduced as part of Fannie Mae’s Selling Guide update SEL-2011-05. Considering its impact on real estate investors, there was surprisingly little fanfare around its release.

Because of the Delayed Financing Rule, real estate investors can now pay cash for a home, then extract that cash immediately post-closing via a mortgage.

Click here to get a mortgage rate quote.

Prior to the Delayed Financing Rule, there was a mandatory 6-month waiting period.

The Delayed Financing Rule qualifying standards are:

The new mortgage may not exceed the documented property purchase price
The original purchase must have been arms-length
The original HUD-1 must document that the sale occurred
The original HUD-1 must confirm that no financing was used
A title search must show that no liens exist on the property
Funds used for original purchase must be documented

Delayed Financing Rule mortgages are subject to a 70% loan-to-value limit except for investors with more than 4 properties financed.

For investors with more than 4 properties financed, the Delayed Financing Rule LTV limit is 65%, and other 5-10 Property Program restrictions apply, too.
You Paid Cash, Now Mortgage That Cash Back

The Delayed Financing Rule was meant to for investors paying cash, but everyday homeowners can use the program, too. Mortgage rates are the same as for any cash-out refinance and there are no specific “points” or other fees added to the loan.

Closings are scheduled like “normal” refinances and the underwriting process is the same.

Not every bank will offer mortgages using the Delayed Financing Rule, though. Especially for investors using the 5-10 Properties program. Waterstone Mortgage does offer it, however.

You can click here to get a rate quote.
Dan Green
About the Author

Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan call 513-443-2020.

Any investors in NJ that want to take advantage of this new rule change please feel free to contact me:

Mark Slade
Keller Williams