Is Delayed Financing Right for Your Home Purchase?

Estimated reading time: 2 minutes

In a competitive housing market, timing is everything. While traditional mortgages are often the go-to way to obtain homeownership, they may come with limitations. With delayed financing, homebuyers get the benefits that come with all-cash offers and recoup their investment with a cash-out refinance. Let’s dive into this form of home financing and the benefits it may bring!

What Exactly is Delayed Financing?

Fannie Mae’s delayed financing offers homebuyers an alternative to a traditional mortgage. Instead of acquiring a loan first to buy a home, a delayed financing buyer would first pay for a home in cash, make any repairs or renovations necessary, and then obtain a cash-out refinance to reclaim the funds used for the initial purchase. This effectively returns a large portion of the cash you paid to acquire the home right back to you.

Why Would a Person Choose Delayed Financing Over a Traditional Mortgage?

An all-cash offer is seen as more efficient than one with mortgage financing because of fast closing. 1/3 of all home purchase are now all-cash deals, according to reporting by Redfin.

Although every financial situation is different, it’s typical for a loan to take thirty days or more to close. Processing, underwriting, and closing are all necessary with a traditional mortgage to ensure accuracy before a lender gives you money.

In addition, delayed financing allows you to put money right back into your pocket. Instead of tying your savings into a home with prepaid costs, you can use the money you saved to make improvements to your new home for up to six months before obtaining a cash-out refinance.

What Type of Buyer Would Benefit from Delayed Financing?

Homeowners Looking to Downsize

Let’s say you’re a homeowner has already paid off the mortgage on your current home but is now looking to downsize. You could take out a traditional mortgage to finance the purchase of the downsized home or you could utilize the cash flow from selling your existing home before settling into mortgage payments later.

A Homebuyer with Cash Flow

Whether you’re an investor or a homebuyer with the financial means and reserves, delayed financing may be more effective for your financial goals. Many people use the money from a cash-out refinance to build their savings, make additional investments, pay off high-interest debt, or complete renovations.

Home Financing Solutions That Work with Your Needs

Not all mortgage programs will work with your finances or goals. It’s best to speak with a Loan Originator about what’s best for your needs. Ready to begin the homeownership journey? Contact us today to learn more about delayed financing and our other home financing solutions!