SOME CONTENT OF THIS ARTICLE IS OUTDATED - LENDING GUIDELINES HAVE CHANGED
100% NO-SEASONED CASH OUT REFINANCING ON INVESTMENTS IS NOT CURRENTLY AVAILABLE (2007)
PLEASE DO NOT CALL ABOUT THIS PROGRAM! THIS ARTICLE WAS WRITTEN IN LATE 2006 - THIS IS LONG GONE!
There are several types of "seasoning" in real estate finance. There is "seasoning" of funds (the buyer's funds), there is seller "seasoning on title" of the property being sold and there is "title seasoning" on a property being refinanced. Seasoning simply means "the period of time which a property or asset has been under the direct control of a party". In other words how long you've had it.
Many loans for purchase require that (a) the seller seasoning (how long the seller has been on the title of the property being sold) be at least 6 months and (b) the funds the purchaser will be using for closing have been in their possession for a minimum of 2 months.
Refinancing is a different story altogether. In a "refi" there is no requirement for seasoning of funds but there is almost always a requirement for seasoning of property or the length of time the borrower has been on the title to the property. Until recently almost all lenders have required the owner of an investment property to have been "on title" for a minimum of 6 months and in most cases 12 months to refi the property and take the full appraised value as the loan amount. This can be big.
The ideal situation for this type of refinancing is when you have acquired a property below value with your own cash, hard money or against your HELOC on your primary residence and did some rehab work to a vacant property increasing the value. Maybe you paid $185,000 for the property, put $50,000 into it and now it's worth $299,000. You could (a) sell it and pay some huge capital gains or (b) refinance and take cash out deferring taxes until you sell (or you could also put the property into a 1031 exchange and further defer the taxes).
Almost any bank or lender will tell you you (a) need a minimum of 6 months seasoning on title or (b) can refinance only to the original sales price of your new property - which would not pay you back for rehab or upgrades. However, we - through our massive connections in the industry - can offer a borrower 100% cash out refinancing to the new appraised value on investment properties with no seasoning on title.
You know, just typing that title "100% No Seasoning Cash Out Refi on Investment Properties - with Stated Income!" makes me wonder why some lenders are so strict they don't even want to finance a primary residence that has even one real estate investment property in the same subdivision and then you have these seemingly caution less private lenders offering deals like this. Keep reading, my head is spinning from having this investor contact us. Real estate investment financing is an odd and ever changing business!
Basically this is the pinnacle for real estate investor financing. In fact if you are a real estate investor looking for financing I can tell you from financing over 2000 real estate transactions this loan program is not going to be available long.
Let's say you've purchased a property with your own cash, your HELOC (don't do that) or hard money. Let's also say you've done upgrades and repairs. Here's what this really means: you can cash out, pay yourself with tax deferred (borrowed) money, and pay off the original debt. I just have to say it again because it's so hard to believe: 100% No Seasoning Cash Out Refi on Investment Properties - with Stated Income!
If you've owned the property for 7 days (been on title for seven days) this investor will loan you 100% of the new appraised value. Not the purchase price like some lenders, the APPRAISED value. Of course it will be their appraiser at your cost but who cares!?
And let me go a little farther to say if you ask the rate anywhere near the beginning of the conversation we may be subject to break out in laughter. The rate, to me, is very reasonable for the risk this lender is taking in loaning 100% of the value of an investment property.
Advantages?
No pre-payment penalty
620 Score for Full Doc (read it again, it said 620)
650 Score for Stated
NO Mortgage Lates
NO Trade Lates
Judgments over $500 have to be paid at closing
Medical judgments are ignored
I will remind you that this is going to be a tough loan to do and the lender, not you, not me, calls the shots. If they ask for it, get it. If you argue with my staff member who asks for it they have my permission to tell you to buzz off :) Underwriting decisions in 48 hours but they do have to wait for you to get your documents to me, me to run the standard verifications and the appraiser to submit the appraisal. So what if it takes 30 days? This is ONE HUNDRED PERCENT of the APPRAISED VALUE on an INVESTMENT PROPERTY with NO SEASONING!!!!
Recommendations
Have all of your paperwork in order: 2 years of tax returns, 2 months of bank statements, 1 month of pay stubs, face value on life insurance, amount in savings/stocks/CD's, other properties, leases, rental agreements, etc.
If you are self employed we'll need either 2 years of business licenses or 2 years of CPA letters. We'll need your business tax returns for 2 years and your business bank account for 2 months.
BE HONEST with us about EVERYTHING. If you're honest with us in the beginning we'll work with you to get over the humps no matter what it takes. If you are not honest with us we're going to find out anyway and then we won't be happy and you won't be happy.
ONCE YOU'VE APPLIED do not go make any purchases, do not apply for credit ANYWHERE ELSE. If you don't think you want to work with us, don't start. Don't charge up your credit cards. Don't change job status in any way except maybe to get a promotion and a raise!
(c)2006 Ken Cook. All rights reserved. Permission to reprint this article is granted with the following limitations: The article must not be edited except for spelling. This copyright must be included immediately following the article as it appears here. This article may not be included in any materials commercially available for sale or where any fee is charged even for other materials without prior written consent.
Investor funding available in Georgia and Florida from Novation Mortgage.
Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062. Georgia Residential Mortgage Licensee #20014. Equal Housing Lender. A Direct Mortgage Lender.
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