Delayed Financing For All Cash Purchases

In the current purchase market, where demand is greater than supply, wealthy buyers are often able to secure a winning bid through an all-cash offer. While some of these buyers may be fine dispensing with purchase funds for the long term, others may prefer to refinance the property to recapture liquidity for security or the purchase of a new property. For a while, up until June 28, 2011, when Fannie Mae introduced its Delayed Financing Rule, there had been a mandated 6-month wait-period on these transactions. Since then, delayed financing has become increasingly popular and more lenders are willing and able to underwrite these loans.


Delayed financing can now occur just one day following an all-cash purchase and eligibility is based on a fairly simple set of requirements:


  • The new loan amount is not more than the actual documented cost of the purchase property, plus closing costs.
  • The purchase transaction was an arms-length transaction.
  • The purchase transaction must be documented by a HUD-1, confirming no mortgage financing was used to obtain the property. A preliminary title search or report must confirm no liens.
  • The source of purchase funds must be documented (bank statements, personal loan documents, equity line draw from another property). Any loans used as a source of purchase funds must show as repaid on the new refinance HUD-1.
  • All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

Since delayed financing is considered “cash-out,” the loans tend to be slightly more restrictive than the norm. Pricing will often be a bit higher –generally beginning at around a quarter percent higher in interest rate –and loan-to-value ratios will usually be a bit tighter. The percentage of financing offered will often be limited to around 70 percent of the purchase price for single family residences. 2 to 4-unit investment properties will generally have financing limited to 65 percent of the original purchase price.

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