'Seasoned' Funds

Seasoning in the realm of mortgages is how many payments have been made. If you have paid three payments you have three months of seasoning.

Most refinances require seasoning (payments) before they will let you refinance. Most refinance seasoning requirements are 6-12 months.

There is though, a term called no seasoning refinancing. This means that you can refinance before the first payment is to or has been paid.

FHA also requires seasoning. They will not fund a buyer if the current owner of a property has not owned or seasoned a property for three months. This means that if you purchase a property and are selling to someone using FHA funding you will need to own the property for three months.

I assuming Seasoning is a non-issue when you are assigning a contract (you actually never secure financing, right?) or with a Double close using someone like Coastal Funding, who funds your purchase knowing you are turning around and closing on the sale of the home immediately afterword. Am I right here - does seasoning only come into play when you are buying and holding the property for a few months to rehab and then sell or to hold longer term as a rental property? You wouldn't be doing a refi/cashout unless you were holding the property for a while, correct?

I'm new at this and trying to get going with assignments, so your help would be greatly appreciated. Thanks for all the great info. that is provided here.

Actually, when you do wholesaling (birddog) or assignments you don't need financing.

Thanks for the explaination. I didn't think it was something I needed to worry about, but wanted to make sure. Will remember the info for future reference. You guys are great!

Sandi

From your post, it seems you have a good understanding of the wholesaling process. I'm still reading and learning, but I'll get there...hopefully not too far behind everyone else. lol I'm fairly new too, but highly reccommend reading all the forum/posts dealing with assignments - they are goldmines of info. Good luck. Will be watching for future posts from you!

Sandi

Thanks for the input. I'm real good at taking a straightforward process and making it complicated. Duh! If it sounds too easy,it worries me, and I'm looking for ways to fix problems that will probably never come up wholesaling. Remind me to keep it simple! Thanks again!

Sandi

How does credit affect the bank's decision to refinance?

I have a HML in mind that will only consider funding if you have a preapproval letter from the bank. I may be another SanCar in this sense, but would a bank even give you a preapproval for a refi if you don't have the property already?... along with not so good credit?

I'm thinking that the bank will want some type of proof of rental income from that property, but I wouldn't be able to give them that without actually having possession of the property.. or a lease guaranteeing that income for that matter.

Anybody have any advice about my dilema?

I am easily confused. If you had a preapproval from a bank why would you need a HML? And I'm pretty sure the bank can't/won't refi a property that you don't already have financing on. Maybe I'm not understanding your question. I hope someone else will answer your post and give you the info you need. Best of Luck.

Sandi

Sandi,

I have a HML lined up, but the HML will only back me if I have a preapproval to refi.

Have you or anybody else every heard of this? Or have made it happen? If so, please share.

A very common way to deal with real estate is to purchase properties using a hard money lender. This gives you a cash, quick and easy purchase. This will allow you to control the transaction easier and even beat out other buyers using conventional financing.

The problem with hard money lenders is that they are expensive compared to conventional financing. Because of this investors will often use hard money lenders to get a better, quicker purchase then refinance into a conventional loan. This way they get the more powerful purchase then a better interest rate after the refinance.

Hard money lenders make more return on investment the shorter you have their money. In the case of RataSan they want the buyer to refinance quickly, so that they know they are going to get paid, decrease their risk and increase their return on investment.

Refinancing, because it is conventional you will need to do W-2's, pay stubs, credit and the likes just as you would a purchase, but, they are actually a little easier to do.

I got the drift, but what I don't get is how am I suppose to get a PREAPPROVAL for a refi and I don't have the property yet? Do I explain the preexisting situation with the HML? And more importantly, will they consider the perspective rental income?

I don't have w-2's (1099 income) and my credit isn't so good... That's why I HOPE they consider the rental income.

What do you think?

You should find a mortgage broker that can do a no seasoned refinance first. When you know they can have them qualify you as though you are going to do a purchase but make sure they understand that it is for a refinance. I have had them also put assumed property criteria when doing the refinance pre-approval. It seems the keys would be the mortgage broker.

Thanks nstreet! I will make that a part of my day until I find one. Thanks for the tips. Truthfully, I know what to do. It's just getting it across to the banks/brokers that gives me pause. That's a hump I need to get over. When talking to people, there's a scale that can either tilt toward unsure and nervous... to very confident. It just depends on what comes out of me at the time.

I just need to walk into they're office/establishment like it's my own. Don't I?

Thanks nstreet! I will make that a part of my day until I find one. Thanks for the tips. Truthfully, I know what to do. It's just getting it across to the banks/brokers that gives me pause. That's a hump I need to get over. When talking to people, there's a scale that can either tilt toward unsure and nervous... to very confident. It just depends on what comes out of me at the time.

I just need to walk into they're office/establishment like it's my own. Don't I?

This is how I see it. Doing that will put you in a bad light, or image. Just go with confidence and remain focused. If you have to wait, pull out the folder and reread the paperwork you are submiting. Hope this helps.

charlie-d

..but I didn't mean that literally. That's my way of saying ...with complete confidence.

As with any good resource it pays to network and ask others in the area. If you are trying to find a good mortage broker that can work with your situation try to contact area investment clubs, investors or top realtors. They usually know the mortgage people getting the deals financed in the local area. Good luck with your deals. Believe and Achieve!

Indi - I have an appointment with a broker from Wells Fargo on Thurs. It's a referral from a colleague of mine. I explain everything to her and I believe it's going to work out. All I need is a pre-approval letter and I'm set.

Hi: RataSan thank you for your clear delivery. I understand completely what you've stated. I am also having a difficult time in finding a HML broker. Could you please refer me to them? If you don't want to do it that way, please post their email/contact information. I would greatly appreciate it.

Hello Dean's family, and a special hello to nstreet. Nstreet your information is very valuable to me.

I have an accepted offer. A Hardmoney Lender is willing to Refinance. He is asking for the "Use of Funds" and "Exit Plan". Please explain to me what I can say my Exit Plan is and Use of Funds.

The Use of Funds is: I want to use the money as downpayment, is answer o.k.?

My Exit Plan is: To pay him with monies I get from the cash I receive at closing. Does that make sense?

Please your answer is need immediately.

Thanks,
[edit: please do not post emails or phone numbers]

Branchbillions,

I am sorry I did not see your post a little earlier. Here is the answer to your email:

First the purpose of your loan will be different depending upon what you are looking to do. From the email you left originally it seems that you are looking to purchase then refinance the property? If this is the case your use for the funds would be to take ownership of the property before you refinance. Your exit strategy would be that you will be refinancing.

If your purpose is to purchase then resell...well, that would be the use of the funds. Your exit strategy would be the resale of the property.

Most lenders such as those we are talking about will ask for a second exit strategy as well. The what if. What if you cannot refinance what will you do? What if you cannot sell the property what will you do?

If you have thought a couple of steps down the road and you can share this with the lender, whether they ask for it or not, will show you are professional and will give the lender more comfort in you as the buyer.

Look in your local area for REI clubs. This is a group of investors who get together and network. you don't have to own 100 props to get in. When I joined my club, I had only done a couple of bird dogs, but did not have any deals that were done. the knowledge that you will gain is priceless. Plus you get to talk with investors just like you looking to make $$$. Like I have always said, the first best thing I have done was to join this site and the next best thing was to join a REI club. You won't be sorry, good luck...Jan

Thank you nstreet: Correct me if I'm wrong, from what I have learned, one of your replies addressed this issue: We can apply a Hard Money Refinance Loan before purchasing the property, and as long as we have a pre-approval for the property we can use that Refinance money for the down payment to purchase the property.

That sounds outlandish, but I think that is what I read.

Will Coastal-Funding assist with this Transactional Loan or should I do a Back-To-Back Closing?

Thank you!

I hope I have not made this concept to confusing.

Here is what I am trying to say as bullet points:

1) Purchase a property using hard money financing. This gives you strength as a cash purchase.

2) Re-finance quickly. Very quickly. Before your first payment is due to the hard money lender. This quick re-finance is called "No Seasoned" refinancing.
------ You don't want to hold the property too long using a hard money loan because they are too expensive to have loans with for too long.

We know that we can get pre-qualified to get a conventional loan for a purchase. But, we are not getting a conventional loan to purchase. We are getting a conventional loan to re-finance. However, we can get pre-qualified to re-finance just like we can get pre-qualified to purchase.

So the idea would be this: 1) Get pre-qualified to re-finance. 2)Purchase the property with a hard money loan. 3)Re-finance quickly. (No Seasoned Refinancing).

Once this is done you purchased the property with cash, quickly re-financed and now have a conventional bank loan with a good interest rate.

Some lenders look for seasoned funds. That is an account with a bank or investment house that has an average balance over three to six months that represents the buyer's "down payment". The lenders like to see the available funds being there as cash rather than a being borrowed from some other source at the time of closing.
Some agents will want to see the pre-approval and proof of seasoned funds so they are comfortable that the buyer has access to the money to purchase the property. The comments are correct, doing assignment of contract requires neither seasoned funds or a pre-approval, it just makes the investor's life a little easier if they have them.

Thank you nstreet as always you make things so clear! I like the way you have broken this down. I have not used hard money yet but my understanding is that they base their decision to loan off of the property and strategy mainly, more so than an individuals credit, W2's etc. correct? I am not currently employed but own a rental unit free and clear that cash flows which I'm guessing doesn't help my case anyways. If I can obtain a HML, what would be my best strategy to get a no season refi after I purchase the property using HML? Could I buy the property with a partner who is employed and has good credit?.. and then refi using the partners' credentials in order to qualify for conventional refi? Commercial loan? I would appreciate any suggestions and hope I've been clear. Thanks!

This link on Dean's site explains how to get $250k to $450k for real estate deals without credit Amazing!

http://www.deangraziosi.com/real-estate-forums/buying-foreclosures-reos-...

I have talked to a few small banks in town and once I ask Matt Larson's questions, they seem to be willing to fudge on just about everything. But I do seem to be confused about one thing. When I asked about seasoning it was no problem but they will only refinance 75-80% of the PURCHASE PRICE. If I use a private lender for cash to purchase then do a quick refi, where do I come up with the other 20-25% If I don't have any cash?

First Ratasan:
On residential properties, lenders do not generally take into account the rental income. On Apartment building deals, properties are valued based upon the income the property generates and this is why it is easier to get into ownership of apartment properties.

Sancar, preapproved means nothing. A preapproval letter says that as long as you meet their terms and requirements, they can fund you, and any such preapproval does not mean you will get a loan.

A letter of approval is the only thing that means anything.

Hi Aaron, Banks may use purchase price or appraised value. On a purchase it is common for them to lend "eighty percent of purchase price or appraised value, whichever is less". That is tough for the investor who is doing a great job of negotiating. An example: ARV of the property $100k, needs $10k in repair so current value should be $90k. You negotiate the purchase for $60k. The bank would lend 80% of $60k or $48k. Their loan would actually be 53% of current value (48/90). The buyer still has to come up with $12k plus closing costs.

That is where a HML may make sense if they are willing to lend 65% of ARV or $65k on the property. That gives the investor the money to purchase and pay closing costs. The investor could complete repairs, bringing the market value to full FMV. After all the renovations are complete, you need a bank that would do an appraisal and lend on the appraised value, which at this point should be $100k. Banks are all different and some would approve a deal like this, others wouldn't.