Normally, a conventional cash-out needs a borrower on title for six months. Fannie Mae's delayed financing exception (Selling Guide B2-1.3-03) waives that wait when you bought the home with cash, so you can take out a cash-out loan right after closing and recover the money you put in.
It's popular with buyers who paid cash to make a stronger offer, and with investors who want to redeploy cash into the next property.
Requirements
- Timing: the purchase closed within the past 6 months, measured from the purchase date to the date the new loan funds.
- Arm's-length purchase: the seller can't be a relative or related business.
- No financing on the purchase: the original settlement statement must show no mortgage was used to buy the property, and a preliminary title report must show no liens.
- Source of funds: you document where the purchase money came from — bank statements, a personal loan, or a HELOC on another property, for example.
- Ownership: the home can have been bought by you, a qualifying trust, or an LLC or partnership owned 100% by the borrowers.
- All normal cash-out limits still apply, including maximum LTV based on the current appraised value.
How much you can get back
The new loan can't exceed the smaller of:
- Your documented investment in the property plus the new loan's closing costs, prepaid items and points, and
- The normal cash-out LTV limit — for example 80% on a one-unit primary home, 75% on a one-unit investment property, or 70% on a two- to four-unit investment property.
Example: you buy a rental for $300,000 cash. It appraises at $300,000. The investment-property limit is 75%, so the most you can borrow is $225,000 — even though you put in $300,000.
If you borrowed to buy
If you financed the purchase with a loan that isn't secured by this property (a personal loan or a HELOC on another home), the cash-out proceeds must go toward paying that loan off, shown on the settlement statement. Any remaining payment counts in your debt-to-income ratio. Gift funds used for the purchase can't be paid back from the proceeds.
Delayed financing vs. a DSCR cash-out
Delayed financing uses conventional rules, so you qualify on your personal income. If you'd rather qualify a rental on its rent or close in an LLC, a DSCR cash-out refinance may work; each DSCR lender sets its own waiting period.
Documents checklist
- The original closing/settlement statement from the purchase
- Bank statements or loan documents showing the source of the purchase money
- Preliminary title report showing no liens
- Normal income, asset and credit documents
Related: Cash-out refinance requirements · Cash-out to buy an investment property · Cash-out calculator
Frequently asked questions
What is delayed financing?+
It's a Fannie Mae exception that lets you do a cash-out refinance within six months of buying a home with cash, without waiting the usual six months on title.
How much can I get back with delayed financing?+
Up to your documented purchase investment plus the new loan's closing costs, but never more than the normal cash-out LTV limit based on the current appraisal.
Can I use delayed financing on an investment property?+
Yes. The normal investment-property cash-out limits apply: 75% for one unit and 70% for two to four units.
Can I use delayed financing if I bought in an LLC?+
Yes, if the LLC or partnership is 100% owned by the borrowers on the new loan and meets Fannie Mae's requirements.