Cash-out refinances

With Southern California being one of the countries hot spots for foreclosures, REOs and short sales, property investors are finding that having cash to buy properties without a loan can work in their favor.

The ability to buy a property all cash may create opportunities for buyers due to the following:

• Cash offers allow for a quicker escrow period which may help truly distressed homeowners get out of their bad financial situation faster

• Cash deals allow for buyers to purchase a property which may be in such disrepair that a bank won’t lend on it

• With no loan contingency, sellers may be more willing to accept a lower offer price

• All cash deals tend to be a more smooth transaction and may get priority over other types of offers

As a result of these benefits, property investors have been adopting the following strategy for acquiring properties: buy the property all cash in order to get the lowest possible price, immediately ‘flip’ the property -OR- do a cash-0ut refinance to recoup their cash investment, move on to the next purchase.

Unfortunately for investors, recent guideline changes by Fannie Mae, Freddie Mac and the FHA have curbed this type of activity.

If your plan is to buy an investment property (or primary residence) all cash, then do a cash-out refinance to replenish some of the monies used for the purchase, you will have to wait at least 6 months before completing the refinance.

If you have questions, please contact me at TrustYourLender@gmail.com