Buying a home for cash might seem a little out of the realm for most people, but if you have the funds and are in a competitive market, it may be the way to go. You can now get most of your cash back within 24 hours… In the past, at least 6 months would have to pass before the you could refinance the property with a cash-out refinance. Today, the wait is strictly 24 hours – which means the borrower can recoup his money right away.
How it Works
If you purchase a home in cash and want to recoup your funds then you can apply for the Fannie Mae Delayed Financing program. This program allows you to take out a loan on the home you just paid for gaining some of your capital back. There are restrictions on how much you can take out, however, and of course, qualifications that must be met.
Fannie Mae Delayed Financing can be used on a variety of different types of properties. Primary, secondary, and investment homes are all eligible for this financing. Where the differences come in is how much of the equity can be taken out with this cash out refinance. If you are living in the home as your primary residence, you can take out up to 70% of the equity of the home, If the home is a second home or investment, you are only allowed to take out 60% of the equity with the cash out refinance. If this is an investment property, you are not allowed to have more than 10 properties in order to qualify, although some lenders will maximize that number at 5 properties.
In addition to standard loan qualification guidelines, such as meeting the minimum credit score and debt ratio requirements for the loan, the Fannie Mae Delayed Financing program has a few other stipulations:
- You cannot have purchased the home from a relative, friend, or co-worker. You must have what is called an arms’ length relationship with the seller, basically meaning you did not know the seller.
- The cash used to purchase the property must be able to be sourced. The lender needs to know that you used your own money to purchase the home.
- If you used money from another loan, such as a Home Equity loan, the cash taken out of this home’s equity will need to be used to pay off that home equity loan before you are given any of the cash from the loan.
- You must provide the CD from the closing showing that you did, in fact, purchase the home.
- The title company will perform a search on the property to ensure that there are no existing liens on the property before you close on the loan.
Advantages of the Fannie Delayed Financing Program
The Delayed Financing Program offers buyers a valuable advantage; they are able to make a cash offer on the home. Most sellers are much more willing to take a cash offer than one with a financing contingency, which means you get the home faster. In a competitive market, that could be a huge competitive advantage. If you have the funds to purchase the home right away, you can do it, knowing that you will get your cash back in a few short weeks after the approval for the Delayed Financing Program goes through. It also allows buyers to purchase a property that would otherwise never get financing. With a little work and a little capital outlay, the buyer can eventually get a large portion of his cash back, enabling him to purchase other investment properties or invest his money in other ways.
As with any loan, you will have to meet certain requirements, but the Delayed Financing Program is available in all 50 states. If you are curious if you would be eligible for the program, talk to a lender before making the cash offer, just so you know where you stand. If your credit is in disrepair or you have a high debt ratio, you may not qualify until you work on your finances. Once everything is on the up and up, you may be a great candidate for this program, allowing you to jump right into real estate investing.
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