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What is Delayed Financing?
Delayed Financing is a conventional mortgage loan program where it enables a cash buyer of a home to do a cash-out refinance mortgage as soon as they close on their home purchase cash. There are strict cash-out refinance mortgage lending requirements both by Fannie Mae and by HUD. Under normal circumstances, a homeowner who purchased their home with cash money needs to wait six months to do a cash-out refinance mortgage with a conventional loan and the maximum loan to value on a cash-out refinance mortgage is 80% loan to value. With FHA loans, the home needs to be an owner occupant home and the maximum cash-out refinance mortgage loan to value maximum is 85% and there is a one year waiting period after the home purchase in order to do a cash-out refinance mortgage. For FHA loans, to do a rate and term refinance mortgage, the waiting period is six months.

With delayed financing, a homeowner can do a cash-out refinance mortgage loan the day after they close on their home with cash. The maximum loan amount is 70% loan to value. Another stipulation is that the new mortgage loan balance cannot exceed the purchase price of the home. For example, if a person purchased a home for $100,000 for cash and invested another $100,000 cash in rehab costs and has an appraisal of the after improved value of $200,000, the homeowner will qualify for 70% of the appraised value of the home, which is $140,000 but due to the stipulation that the maximum loan amount cannot be greater than the actual purchase price of the subject property, the delayed financing maximum loan amount would be $100,000 since the homeowner purchased the property for $100,000.

Attached is a recent blog I wrote and published on Delayed Financing:


Here is another popular article on Delayed Financing:


Delayed Financing will pose a problem on a recent case scenario I just ran into with a mortgage loan client. My delayed financing borrower purchased a home for $10,000 and did $100,000 worth of work. It was pretty much a new construction deal. The home just got appraised for $200,000. Under Delayed Financing mortgage lending guidelines, my mortgage loan borrower will qualify for 70% of the after improved appraised value, which is $140,000 but cannot exceed the purchase price of the home when he bought it cash. My client bought it for $10,000 so under the Delayed Financing mortgage lending guidelines, he cannot borrow more than $10,000. Here is a related article on home flipping.



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