What Does Delayed Financing Mean?

Buying a house all cash is a great way to win the deal, but it ties your money up in an illiquid investment. If you need access to the funds, you may use delayed financing to get a portion of your cash investment back.

What is Delayed Financing?

Delayed financing means you bought a house all cash but now want to finance it to get access to some of your funds.

It's a common practice in a seller's market when there is a lot of competition. First, buyers want a leg up on the competition, so they offer all cash to make their deal more solid than the others. Then, once they close on the home, they want access to their cash, so they take out a cash-out refinance.

How Delayed Financing Works

To use delayed financing, you must be able to buy a house all cash. Then, after closing the sale, you can apply for delayed financing. There isn't a waiting period because you don't have any financing on the home.

To qualify, you must complete an application and provide documentation to prove you can afford the loan, such as:

• Paystubs
• W-2s
• Tax returns (if self-employed)
• Bank statements
• Investment statements
• Credit report

Underwriters will ensure you have the credit score and income to qualify for financing. Like purchase financing, you'll pay the closing costs required to process and close the loan.

Most borrowers can access up to 80% of the home's value, leaving at least 20% in the house as collateral for the lender. However, you can borrow as little or as much as you want up to the 80% limit.

Who can use Delayed Financing?

Anyone that pays cash for a property can use delayed financing. Common borrowers of the program include:

• Real estate investors
• Rehabbers
• Empty nesters

Qualifying for Delayed Financing

To qualify for delayed financing, you must prove you can afford the loan, like any mortgage, but there are other requirements too, including:

• Arms-length transaction
You must prove the transaction was arms-length, meaning you didn't buy the property from a family member. This ensures each party acted in their own interest and the sales price was
fair.

• No mortgage financing
You must prove you didn't take out any financing to buy the house. Delayed financing is only applicable on homes you purchased with 100% cash.

• Prove the funds used to buy the house
You must prove the funds used to buy the house. This includes a paper trail showing where the funds originated.

• No liens
To get delayed financing, the home may not have any liens, including mortgage loans.

Final Thoughts

Delayed financing is a great way to buy a house for the most favorable terms and then access the cash using a mortgage. First, however, you must prove you can afford the mortgage once you've depleted your savings buying the house so that you aren't a high risk of default.

But delayed financing can get you up to 80% of your investment back in cash; remember, you'll pay interest on the money you borrow, so only borrow what you need to make the most of your investment.