Buying a house with cash - what are the options to finance it later?

[KiloRomeo]

Hi all,

Long story short we have been trying to buy a house in a specific area for a long time but continuously get beat out by cash investors. A house has recently popped up that we are interested in and unfortunately it's another cash only deal. We are very fortunate that we actually have enough cash saved up we could buy this but it wouldn't leave us very much left over for rehab and would deplete our savings. 

If we bought it with cash, could we refinance it later? Would the rates be similar to a normal mortgage or higher? I would just hate to have all that cash tied into a house. Any thoughts or suggestions would be appreciated.

[Baron235]

I am going through this now.  See my earlier post this morning.  We talked to our mortgage guy about this before we pulled the trigger and he said you would get normal rates and it would just be treated as a refinance.   Right now it looks like it will take us a couple of months from the purchase to when the mortgage will be in place.   

[KiloRomeo]

All I see is a post on title insurance?

[Hannah]

Is this a primary home, or a rental? In previous threads some of the real estate folks have mentioned some difficulty doing this with rental properties, and that is consistent with things that I've seen on the BiggerPockets blog/forums- it's not impossible of course, just requires creativity and usually a bank relationship. A primary home should be much easier because you have 3 options- refinance, HELOC, and a collaterized (sp?) personal loan.

[KiloRomeo]

This would be our first and primary home.

[stickynotes]

So take a look at your contract template. In the DC-MD-VA area there is a clause that says a buyer is allowed to change financing arrangements as long as (and this is key) you don't delay closing. I haven't personally tried this yet, but a friend of mine has pulled it on about 10 properties - you drop the offer, all cash. This puts you in front of the line, then you set up financing (use your home inspection contingency if you need access for the appraisal) and close. The key is to give yourself enough time for settlement and work with a bank you trust who won't hold you up on a lot of bs nonsense. It's risky, but it will keep you from having to close twice. Good luck.

[burly]

I am going through this now.  See my earlier post this morning.  We talked to our mortgage guy about this before we pulled the trigger and he said you would get normal rates and it would just be treated as a refinance.   Right now it looks like it will take us a couple of months from the purchase to when the mortgage will be in place.

I do customized lending for a living so let me clear some things up here.

1. Most banks will do a cashout mortgage but it is always a higher rate than a purchase mortgage. ~ 50bps

2. I believe in nearly all states, you can just put in an offer letter without a mortgage contingency clause and you can pay however you want as long as you don't hold up closing. Worst case scenario, You pay in cash.

3. Purchase the home and then get a Home equity line of credit (HELOC) for rehab.

4. If this is IRE (investment real estate) - forget cash out - probably wont happen till you show rental history