UNDERSTANDING DELAYED FINANCING
Fannie Mae’s Delayed Financing has been around for a few years now but seems there is still some confusion with the mechanics, and of course lenders still add underwriting overlays. Delayed Financing allows for an investor who pays cash for the property to immediately refinance, receive back up to the original purchase price, and include the closing costs with loan to value based on the appraised value of the property. There can be no lien placed on the property. First let’s define the original purchase; this is the price reflected on the HUD 1 Settlement Statement and is the maximum amount the borrower can receive back. Many customers ask if they can include rehab costs, the answer is no (if they are not included in the original purchase price). Let’s use an example to further clarify. Borrower purchases a property for $75,000 and requires $5000 in rehab costs. If the $5000 in rehab costs is not included in the purchase price of $75,000 these funds of $5,000 cannot be recaptured.
Loan to values will vary depending on the number of financed properties the borrowers owns, 1 to 4 financed properties 75% of the appraised value, 5 to 10 financed properties 70% of the appraised value.
Funds for the purchase of the property can come from a variety of sources and upon completion of the refinance will be required to be returned to the original source. Of course as the lender, we will need to verify the original source of funds. Acceptable source of funds for the purchase could come from a Home Equity Line of Credit secured on another property, checking/savings account or even credit cards just to mention a few. An unacceptable source of funds would be cash on hand, which cannot be verified.
Delayed Financing has become a very popular vehicle for real estate investors and has opened up cash out refinance options for investors who own more than 4 financed properties. This allows an investor to recycle his cash to purchase additional properties and reduce initial investment into the property.
VP of Mortgage Lending
Fax: (872) 808-1296
Dexter Avenue N Suite 100
Seattle, WA 98109
NMLS ID: 112825