1. Home
  2. Blog
  3. Mortgage Basics
  4. Delayed Financing: An Uncommon Refinance Option for Cash Buyers
What Does Your House Choice Say About Which Avenger You Would Be? - Quicken Loans Zing Blog

Paying cash for a house has definite perks. Did you know that paying cash rather than getting a mortgage could help you win a bidding war when buying a new home? You may even be able to negotiate a lower price on the home if you’re paying cash. After all, cash in hand is a sure thing, and a mortgage approval isn’t always a sure thing.

On the flip side, though, mortgage interest rates are especially low right now. Data from Freddie Mac shows the average interest rate on a 30-year fixed-rate mortgage in November 2018 was 4.87% with 0.5 prepaid interest points. Prepaid interest points involve paying for some interest up front in order to secure better mortgage rate.

Twenty years prior, home buyers were looking at a 6.94% interest rate group with more than a point paid upfront, on average, for the same mortgage product. So why not use a mortgage to buy your house and find another use for your savings? What if you invested that money? What if you had major renovations for your new home in mind?

The good news is you can get the best of both worlds with delayed financing: a cash-out refinance option for recent cash buyers.

What Is Delayed Financing?

In a delayed financing transaction, you can take cash out on a property immediately in order to cover the purchase price and closing costs for a property you had previously bought with cash. . This allows you to have the advantage of being a cash buyer and giving sellers the chance to know the transaction will close, while giving you the ability to get a mortgage shortly thereafter in order to avoid having all your savings tied up in your house.

You can think of delayed financing as a way to give yourself the negotiating advantage that comes along with paying in cash for the home, while still giving yourself the long-term financial flexibility afforded by making monthly payments on a mortgage instead of making yourself “house poor.”

How Long Do You Have to Wait to Refinance?

If you’re doing a delayed financing transaction on a property you purchased in the last 6 months, you’re allowed to take cash out immediately without any waiting period.

Under normal circumstances, if you bought a home with a mortgage instead of cash, you have to be on the title at least 6 months before you can take cash out and refinance your home, so delayed financing is a notable exception.

When Would You Use Delayed Financing?

So now that you understand what delayed financing is, you might wonder why you would choose it over more common financing options like getting a mortgage upfront and sticking with it or doing a cash-out refinance down the road.

Well, aside from being able to take cash out on the home without waiting for seasoning, here are some other reasons it might be a good option. Let’s briefly go over the pros and cons.

Pros:

  • A mortgage might not be feasible at the time of purchase. Trying to buy foreclosures and short sales can complicate the mortgage process and sometimes make it harder to get approved for financing.
  • When buying an investment property, you may not want to pay on a mortgage until it’s time to rent out the property. Once you’re ready to buy another property, delayed financing can free up the cash you spent on the first investment property, so you can buy another one or use the cash in some other way.
  • You might accrue unexpected debt after buying a home with cash, or you might just need more liquid assets. Either of these scenarios would be difficult to resolve if you spent all your cash on the purchase of a new home, but delayed financing can help with that.
  • You might be a real estate investor who needs to ease your tax burden. If you buy and sell homes a lot, you might want to consult a tax advisor to see how delayed financing can benefit you. As an example, you can often deduct mortgage interest from your taxes.

Cons:

  • You need lots of cash up front in order to buy a home because you won’t be getting the mortgage upfront. This can be a challenge if you don’t have lots of available assets.
  • There’s some additional documentation required to get a loan with delayed financing. In addition to the usual mortgage documentation you would need regarding income, assets and credit, you need a few more items. We’ll get into them below so you can be prepared.
  • This is only offered on conventional and jumbo loans. At minimum, you must have a median FICO® Score of 620 or higher, among other qualifications.

Am I Eligible for Delayed Financing?

There are a handful of stipulations that have to be met for you to be eligible for delayed financing:

  • Your new loan amount can’t be higher than the total of what you paid for the home, including the purchase price, closing costs, prepaid fees and points.
  • Your original purchase had to have been what’s called an “arm’s length transaction.” That means you can’t be related to or have a personal relationship with the seller. For example, you can’t buy a house with cash from your parents, your boss or your friend and then get delayed financing on it.
  • You need to provide proof that you paid in cash, like your Closing Disclosure, settlement documents or recorded trustee’s deed showing that no mortgage was used to obtain the property.
  • You have to share documentation of the source of the funds you used to purchase the house.
    • If you use savings earned from your employment income or an unsecured loan like a personal loan, you’d need to share the documentation of those transactions.
    • If you have a loan secured by an asset other than the new property (a home equity line of credit, or HELOC, on another home), you’d need to show that the cash you took out was used to pay off or pay down the mortgage on that other property and not to pay for the purchase of the new home.
  • If you were given gift funds for the cash purchase of your new property, you can’t reimburse the donor with the proceeds you’ll get from delayed financing.

Keep in mind that all of these requirements may vary depending on the type of loan product you’re looking for and what lender you’re working with.

Why Might My Delayed Financing Fall Through?

There are a lot of requirements and, as you can imagine, sometimes things don’t work out perfectly and your financing ends up falling through. There are two main reasons delayed financing loans fail to close:

  1. Documentation issues: There are a lot of documentation requirements for delayed financing. If you don’t have everything you need, you’ll need to wait at least 6 months from the date you purchased the property to complete a typical cash-out refinance.
  2. Appraisal issues: The house is appraised when you buy it. When you’re starting your delayed financing loan, it will have to be appraised again. If the house appraises for lower than the price you paid for it, you’ll have to figure out a different financing option or absorb the difference.

If you’re interested in delayed financing, it’s definitely something to learn more about and consider. Paying in cash may help you out. Just be certain that you’re meeting all the requirements for delayed financing if you plan on doing this.

Do you think you might be eligible for delayed financing now? Fill out some basic information or talk to one of our Home Loan Experts at (800) 785-4788 to get started!

Related Posts

This Post Has 34 Comments

    1. Hi Kristie:

      I’m going to recommend you speak with one of our Home Loan Experts. I can tell you that are income requirements for delayed financing are the same as they would be would be for a standard loan. What income history we need from you would depend on the exact specifications of the loan product you’re getting, so it’s best to speak with a member of our team at (888) 980-6716.

  1. Hello, can you do delayed financing for less than $50,000? If I purchase a house for $40,000, can I get a delayed financing mortgage loan for $40,000?

    Thank you,
    Joseph

    1. Hi Joseph:

      The only places where we have minimum loan amounts are Alaska and Iowa where the minimum would be $25,000. Beyond that, it just comes down to whether the closing costs make sense for your particular situation. I’m going to suggest you speak with one of our Home Loan Experts at (888) 980-6716. Have a good night!

  2. I just tried calling several people at quicken loans. And no one seems to know what delayed financing is. They said I must wait 6 months to get the loan. I said I am wrong and “there is no way quicken loans will not wait 6 months.” Any way I can get a hold of someone who knows about delayed financing ?

    1. Hi Ashish:

      I’m going to get this to our Client Relations team to look into your experience. The only other thing I can think might come into play is that it has to be a conventional or jumbo loan, but I’m definitely going to have someone reach out. Thank you for making us aware of this and have a good day!

    1. Hi Edwina:

      Yes we do. There are no state restrictions for delayed financing. If you’re interested, you can get started with one of our Home Loan Experts at (888) 980-6716. Hope this helps! Have a good day!

  3. I just tried this delayed financing option with Loan Depot. It all went well for about a week. Then I got denied. Their explanation was that the State of Texas has a rule prohibiting delayed financing within the 6 month period. Not sure if that’s right but if true the state you live in may also affect a successful outcome.

    1. Hi Douglas:

      I’m not a licensed mortgage banker, so I can’t speak to whether the above is true for Texas. It’s true that there are special provisions for any cash-out transaction in the state. Before ruling out any potential options, I would recommend speaking with one of our Home Loan Experts because it’s also the case that lenders sometimes have different policies. You can reach us at (888) 980-6716. Good luck!

      Thanks,
      Kevin

  4. I just chatted with someone about this from quicken loans. He was not familiar with this but looked it up. There really is no specialist who knows about this type of loan or someone who has successfully done this to talk to? It seems like a great opportunity but a lot of unknowns about it.

    1. Hi Janine:

      We definitely do the loans. There are some special requirements and they can only be conventional loans, but they can be done. I’m going to get this over to our client relations team to help get things straightened out for you.

      Thanks,
      Kevin Graham

    1. It still exists, Marques! Probably the best way to get started is to talk to one of our Home Loan Experts at (888) 980-6716 and we can get you started on the right foot.

      Thanks,
      Kevin

      1. I just spoke to someone from Quicken Loans at (800) 251-9080. I asked if you offer delayed financing, and his question was whether i’m looking to make a home purchase.??? Obviously he has no idea what I was asking. When telling him I”m looking to finance my already purchased home, he told me “We do not do that”.

        So what’s the story???

        1. Hi Jason:

          I’m going to get this to our Client Relations team because while there are some specific requirements that must be met, we do offer delayed financing. I’m sorry you’ve had this experience. Someone will be reaching out.

  5. With delayed financing, what’s the max percentage loan on a duplex? And is it according to the purchase price or appraisal?

    1. Hi Julie:

      The maximum loan percentage is 85%, meaning a 15% down payment. It’s based on the purchase price unless the appraisal comes in lower. No matter what, no wonder can loan you more than the house appraises for. Hope this helps!

        1. Hi Bernard:

          You’re correct that in this specific instance, it would be based on the purchase price unless the appraisal was lower. I’ve edited my original comment as I misspoke. Thanks for the eyes and have a wonderful day!

          Thanks,
          Kevin Graham

          1. Hi Kevin,

            I’ve been speaking with a Quicken rep for a couple days about delayed financing on a single family investment home I am purchasing in cash (in NY). Given the cash purchase, I’m getting the house for below market value. Other lenders I’ve spoken to have said that they will use the appraised value regardless of the purchase price because the appraisal is the true measure of the home’s value, but my Quicken rep has stated that the loan will be based on the lesser of the purchase price or appraised value. So even if the appraised value is $20k more than the purchase price, we still have to use the purchase price…unless I wait the 6 months of course.

            Can you provide some insight? Has Quicken changed their policy since your post above? Thanks!

          2. Hi Carson:

            I can’t speak for other lenders and their policies. However, I’ve just checked the guidelines again for delayed financing. We base the loan amount on the purchase price, closing costs and any prepaid points and fees that may exist. Thanks!

  6. I am getting ready to cash purchase a home and would like to know more about this product such as interest rates and loan fees.

    1. Hi Kelly:

      It’s a regular loan, so there are no special interest rate guidelines. When it comes to interest rates and loan fees, every loan is different based on individual situations. I’m going to recommend you speak with one of our Home Loan Experts by calling (888) 980-6716.

      Thanks,
      Kevin Graham

    1. Hi Steve:

      It’s considered a cash-out refinance for whatever type of property is being purchased, primary, secondary or investment.

      Thanks,
      Kevin Graham

    1. Hi Kim:

      We don’t really have a minimum loan amount except in Alaska where the minimum is $25,000. However, a lot of times when the loan is under $30,000, it can be hard to make the cost make sense for the client. That said, you can do this. I’m going to recommend you give us a call at (888) 980-6716.

  7. Filled out the form and someone called me first thing the following, rep named Derrick… I was asking about specifically about delayed finance and he had no clue what I was talking about. He said Quicken requires the title to season 6mo. I asked him if I could talk to a senior rep…he said he was the senior guy. Asked how long he’s been doing this, he said 3 years. Great article, it’s just what I need, but per your own people you can’t do it. Smh…

    1. Hi Fred:

      I’m sorry you had this experience. We absolutely do delayed financing on conventional loans from Fannie Mae and Freddie Mac. I’m going to make sure I get this over to our Client Relations Team to get this straightened out.

      Thanks,
      Kevin Graham

      1. Hi Kevin,
        My wife called to check on “delayed financing” and was told there was no option other than to wait six months for title seasoning. When she explained about this article, she was told again there was no way. She hung up and moved on. Is there a secret number or form we should be filling out? Thanks.

        1. Hi John:

          If it’s a conventional loan, it’s possible to do delayed financing. There are conditions to this as there are with any mortgage. We do these loans, though. I’m going to get this to our client relations team to look into this and get you back on track. I’m sorry about this, and thanks for reaching out.

          Kevin Graham

  8. I’m buying a a family home with cash as a primary residence. I would like more information on delayed financing.

Leave a Reply

Your email address will not be published. Required fields are marked *