Financing in Lake Arrowhead>Question Details

Michael, Other/Just Looking in Anaheim, CA

Can I refinance after an all cash offer?

Asked by Michael, Anaheim, CA Fri Aug 26, 2011

I plan to buy a second home all cash, however, I wanted to refinance afterwards. My credit is great and I have no problem qualifying..I just need to know if its possible? Is there time restrictions? Will the process be more restrictive? and anything else you think I might need to know.

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Michael:

"I plan to buy a second home all cash, however, I wanted to refinance afterwards. My credit is great and I have no problem qualifying..I just need to know if its possible?"

Yes, you can refinance after closing on the 2nd property.


"Is there time restrictions? Will the process be more restrictive?"

Yes and yes. 1) Time - some lenders may have seasoning requirements AND as I will touch on further below, I would suggest you bypass any lenders that require more than a 60 days seasoning period; 2) Restrictions - you will be restricted in the amount of money you can "cash out" via the refinance.


"... and anything else you think I might need to know."


Yes, you would want to do the refinance within 90 days of closing escrow! Here's why:

In the case of a new primary residence/2nd home, you will have 90 days to refinance the new property to gain Acquisition Indebtedness status (individual mortgage interest deductibility) for the money that is pulled out (the key is that the loan/lien has to be against the new property, not a prior residence where the cash came from, as an example). Hence, my suggestion to bypass any lenders requiring more than a 60 day seasoning period just to be safe.

From http://www.irs.gov/publications/p936/ar02.html

[Quote]
Mortgage treated as used to buy, build, or improve home. A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. This applies in the following situations.

-You buy your home within 90 days before or after the date you take out the mortgage. The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3).

-You build or improve your home and take out the mortgage before the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage.

-You build or improve your home and take out the mortgage within 90 days after the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage.

[End Quote]

Consult a Tax Professional for clarity and team with a mortgage banker that has their own in-house underwriting department (not a retail bank) to take a look at your plans to avoid a situation where you cannot meet the 90 day IRS requirement.


Best, Steve
2 votes Thank Flag Link Fri Aug 26, 2011
You can get a purchase recapture loan within 90 days of the HUD-1 up to 75% of the purchase price.

Happy funding, Rudi
Web Reference: http://www.umboc.com
1 vote Thank Flag Link Fri Aug 26, 2011
Yes, you can do a cash out refinance *1 DAY* after purchasing your home with Fannie Mae financing as of June of this year. I wrote an easy to understand blog post about it at http://www.trulia.com/blog/shanethemortgageman/2011/07/cashi… called "Cash Out Within 6 Months of Purchase". The 4 requirements are:

given 4 requirements:

1. The new loan amount must not be more than the borrower's initial investment in purchasing the home + you can finance closing costs, points & pre-paid items (i.e. escrow accounts). Initial investment is defined as the sales price, not the sales price + cost of improvements done to the property.
2. Purchase transaction must have been an arms length transaction, meaning the only relationship between the seller & purchaser had to arise out of the interest of purchasing that home, no prior relationship permitted.
3. The purchase transaction has to be documented by a certified HUD-1 showing no mortgage financing was used to purchase the home. A HUD-1 is not always used in a cash transaction, so make sure you are requesting one to be done or you'll run into trouble with this part of the requirements.
4. The source of the funds for the purchase need to be documented, such as bank statements, a HELOC from another property, personal loan, etc. It also either needs to be seasoned for 60 days or from an acceptable source. Any financing that was used to for the purchase transaction will also need to be repaid with the proceeds of the new cash out refinance.

Further details are in the blog post.
1 vote Thank Flag Link Fri Aug 26, 2011
Hello Michael,

From the lenders I work with you would have to wait 6 months from the all cash purchase. Also, you could only do a cashout refinance up to 75% max on the loan-to-value on loan amounts up to 417K. Other than that, it would be a standard conventional loan that you could get done within 30-45 days. I hope this helps and if you have any questions, please feel free to give me a call or email.

Michael Abram
First Capital Mortgage
NMLS #235060
Direct: (310) 434-1718
Fax: (310) 451-6407
mabram@firstcapitalmtg.com
1 vote Thank Flag Link Fri Aug 26, 2011
Some banks do have "seasoning" which means you must own it for anywhere from 2 months to 6 months. Some banks may waive it, You shoudl meet with a local and trusted mortgage broker and they can easily prequailify you and let you know what mortgages they may have to help you to refinance.
Web Reference: http://www.ScottSellsNH.com
1 vote Thank Flag Link Fri Aug 26, 2011
With everything you've stated you would have no problem pulling some if not most of your cash back out with a loan from just about anyone in the mortgage biz.
0 votes Thank Flag Link Sat Aug 27, 2011
Of course you can... buy the house and get the best deal with your cash offer. Refinance any time you like after you own it. Great strategy!
0 votes Thank Flag Link Fri Aug 26, 2011
We have portfolio lenders that we are approved with that have no seasoning requirements to do a cashout refinance.
Web Reference: http://www.bma-loans.com
0 votes Thank Flag Link Fri Aug 26, 2011
can you email those lenders to clottjr@gmail.com

Thanks!
Flag Mon Oct 21, 2013
Michael,

I can't see why you wouldn't, but every picture is different and no one could say for certain until you provide your "picture" to a loan officer or mortgage broker. However in general this should not be an issue.

However I would ask, what is the reason you are buying cash and then refinancing? it is a time issue?
0 votes Thank Flag Link Fri Aug 26, 2011
I suggest looking into local credit unions. They have heloc program at 80% on owner occupied homes at crazy low rates. That would be your only option to refi before 6 months.
0 votes Thank Flag Link Fri Aug 26, 2011
You're not really refinancing as you'll own the home. Your looking for a mortgage or a equity line and based on what you've written you should have no problems getting either. I would agree with Scott, that you should reach out to a trusted mortgage lender and discuss your plans and see what your options are.

Good Luck.
0 votes Thank Flag Link Fri Aug 26, 2011
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