"How long until I can cash out on my foreclosure purchase?" My borrower got a screaming deal on the courthouse steps. $80,000 cash bought a 3 bedroom, 2 bath home in relatively good condition. No roof problems, no structural probems, decent kitchen and modern bathrooms.
What it needed was a thorough cleaning, fresh paint and new carpet. That done, the home would bring $120,000 and likely sell for that price within 30 days.
He had intended to flip it for a profit, but the final result was so nice that he decided to keep the home and rent it out. The trouble was, it had eaten up all of his cash, and he wanted to buy another foreclosure.
That's when my phone rang. "Mike," he said, "this is that guy who keeps the wolf from your door. I've got a refinance for you." "How long until I can cash out on my foreclosure purchase?" It's worth $120,000 easy.
"You're not going to like Fannie's answer," I replied.
"Fannie?" You know, FNMA. Fannie Mae.
Let me share with you what I told him:
- If the property was purchased by the borrower within the six months preceding the date of the application for new financing, the borrower is ineligible for a cash-out refinance.
- After 6 months, we will use the lesser of (1) the sales price or (2) the appraised value.
- If significant repairs/remodeling have taken place, you'll have to prove it to me and to the appraiser.
And thems the dirties.