813.910.8020 Apply Now

Mortgage Broker Tampa, FL | Mortgage Lender Tampa Florida | Marimark Mortgage

  • Home
  • Homebuyers
  • Homeowners
  • Realtors
  • Investors
  • About Marimark
  • Contact Us
  • Mortgages
  • Apply Now
  • Current Mortgage Rates
  • Calculators
  • Testimonials
  • Blog
  • Videos
  • Featured In
Home / Blog / Mortgages / 5 Things You Should Know When Considering Delayed Financing for a House

5 Things You Should Know When Considering Delayed Financing for a House

October 21, 2014 By Mary Catchur

Real Estate Game
Photo Credit:Philip Taylor/Flickr/CC.

Many investors, and even sometimes individuals buying property for their own use, don’t have the ability to wait for the 30 days or more that it can take to get a mortgage to buy a property. In that event, they often pay cash for the home and take their cash back out at a later time to free up funds for further investment activity or other needs with delayed financing.

Typically this would be considered a “cash-out” refinance and under standard guidelines, that is not allowed until one year after the purchase of the home. However, there is an exception, referred to as “delayed financing” to allow buyers to take their cash out more quickly.

These rules allow for the buyer to apply for a cash-out refinance immediately (or anytime within the following 6 months) after closing on the home for cash.

With this in mind, here are 5 things you should know when considering delayed financing.

#1 Loan Amount

The new loan amount cannot be more than the original amount invested in the property plus the financing of closing costs and prepaid expenses. The allowed loan amount is also subject to the maximum loan-to-value ratio for the cash out transaction based on the current appraised value. In other words, if the home is purchased for $100,000 cash and the closing costs to refinance are $5000, the new loan amount will be limited to $105,000, even if the new appraised value is $150,000 and a 75% loan-to-value ratio, or $112,000 loan ($150,000 @75%) would otherwise be allowed on this type of transaction.

#2 Source of Funds Verification

The lender, in most cases, will still want to verify the “source” of the funds used to make the original purchase. Therefore all of the same rules apply with regard to allowable sources of cash. If the funds originally used to buy the home cannot be “sourced” or verified (i.e. the cash was under the mattress), then the cash-out refinance will not be permitted. If the funds were borrowed, that will also be unacceptable as there can be no liens on the property. However, you MAY use funds from a 401k plan. Also, unlike standard purchase transactions, gift funds cannot be used to purchase the home.

#3 Copy of HUD Settlement

The lender will also usually request a copy of the HUD settlement statement from the original purchase to verify that the sale actually took place and there are no liens reflected on the HUD.

#4 Arm’s Length Transaction Verification

The lender will want to verify that that the original purchase was an “arm’s length transaction”, meaning it was not purchased from a related party, such as a parent, brother, sister or other family member.  A purchase from a party with an “interest” in the transaction, such as a real estate agent, appraiser or title agent is also prohibited.

#5 Loan-to-Value Ratio

The loan-to-value ratio will be consistent with what would typically be allowed for a cash-out refinance under the same scenario, considering type of property, use of property, etc. In other words, the loan-to-value for an investment condo would probably be different than that allowed for a primary home, single family residence – just as those differences apply to a typical cash-out refinance. However, see loan amount limitations discussed above.

Conclusion

So, if you plan the purchase correctly, following the guidelines above, you should be able to buy your property with cash and then take the funds back out to be used anytime within the following 6 months. This can be a great tool for property investors!

Opt In Image
Stay Informed, It's Your Money
Marimark Mortgage Newsletter

The Marimark Mortgage Newsletter will keep you informed with important events in the mortgage industry that could impact your finances.

We especially focus on ways to save money on your current and future mortgages. And, we continually share the information we share with our clients, because we believe informed consumers are the best consumers.

Real estate agents, and other professionals in the industry, will receive an ongoing wealth of information that will help them serve their clients.

Thank you for signing up!

Filed Under: Mortgages, Refinance Tagged With: delayed financing, home mortgage, property investors

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

Save with a Mortgage from Marimark

Whether you are buying a home or refinancing, you can save with a mortgage from Marimark Mortgage!

    Search

    Post Categories

    Testimonials

    Refinancing with Mary an absolute pleasure

     
    Refinancing with Mary has been an absolute pleasure. I have never been through the process before and she took the time to explain each step. She was prompt (had a rate locked in right away) and most importantly always answered the phone or emails almost immediately! The communication line alone made the refinancing process every bit worth it. Would recommend to anyone, and will be back for any future purchases! Bret Brennan, March 2021
    See More Reviews
    Marimark Mortgage LLC
    5327 Primrose Lake Circle
    Tampa, FL 33647-1328
    (813) 910-8020
    (866) 910-8020

    Accessibility
    Privacy Policy
    Terms of Service
    Sitemap

    Reviews

    Website Testimonials
    Google Reviews
    Zillow Reviews
    Trulia Reviews
    Facebook Reviews
    Yelp Reviews
    BBB A+ Rating

    FOLLOW US

    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    Marimark Mortgage is a BBB A+ Accredited Business

    Recent Posts

    • FHA Announced a 30-Basis Point Reduction to Annual Mortgage Insurance Premiums
    • How Can You Improve Your Credit Score?
    • Historical Mortgage Rates From The 1970s
    • What You Need to Know About Mortgage Forbearance
    • Top Tips to Save Money for a Down Payment

    © 2023 Marimark Mortgage, LLC All Rights Reserved. | Internet Marketing by Image Building Media. | RSS Feed

    Reviews / Recommendations: Google, Zillow, Trulia, LinkedIn, Facebook, Yelp, BBB

    Licensed in Florida by the Office of Financial Regulation, Mortgage Lender License #MLD77.
    Licensed in Virginia by the Virginia State Corporation Commission, License MC#4556.
    Licensed in Pennsylvania by the Department of Banking and Securities, License #40222.
    NMLS#248318 – www.nmlsconsumeraccess.org.