OPTION ARM and no seasoning

Need advice from a Broker/Lender. I’ve been using WAMU’s Option ARMs to finance my investment. The ARM allows me to create great cash flow on my lease options and allows for the transaction to be a cash out refi. I’m purchasing with cash, doing whatever rehab needed and then cashing out based on appraised value to 75% max. LTV. I refi normally within 60-90 days from purchase. I always have the tenant lined up prior to refi. WAMU however, has limited me to 20 transactions. My Broker has mentioned Nat. City, but I think they have seasoning issues. I need to line up financing for next 20. Any thoughts would be appreciated.

World Savings option ARM uses COSI typically as stable as MTA which is used by WAMU for the most part I believe. If you refi into another World loan, there is no pre payment penalty

Thanks AZ,
That helps. I’ll check them out. Do you know of another lender? I’d really like to have three I know can get the job done.
Have you used Nat. City or GMAC?


Ok. What state are you in?

World Savings will only lend to 75% on NOO. They also have a 12 month seasoning requirement to use appraised value. There must be another lender out there that can do this.


Are you looking for option ARMs? Countrywide has one…flagstar bank southstar…novastar…and there are quite a few more that i can not remember off the top of my head. I send most of mine to washington mutual.

Yes, but… who has an ARM with NO seasoning requirement?


Southstar, countrywide, and world savings have option ARMs. Southstar’s is the most liberal, countrywide is pretty good, but world saving’s is much more conservative and the minimum payment rate is higher than the others.

I have been using southstar a lot lately because they offer a 3 year soft prepay penalty (you can sell without penalty)- which allows you to get a lower margin.

Also, if you are buying cash, you should be able to cash out at any time based on the sales price, but this would be lender-specific. Southstar, for example, requires you to hold the property for 3 months before refi.

N/O/O LTVs/CLTV are:

Countrywide: 75/90 with 620 credit score, full doc; 75/75 stated income with 680

Southstar: 75/90 with 620 full doc; 75/75 stated with 640

Nicely done. Thank you.
Southstar, with a 3mo seasoning would work. I spoke to a Countrywide reptile yesterday and he told me their only programs with less than 12 months seasoning for cash out are FNMA and FHLMC. Earlier in the week, World Savings told me 12 months too. Looks like Southstar it is.


Yes, and you can also add to basis for the cash out any documented improvements you made to the property. So, if you bought it for $100K, and put $10K of imporvements into the property, you can use $110K as the basis for the cash out refi as long as you can document the $10K

Are you telling me that the max LTV is based on lesser of purchase price plus improvements or appraised value? Aquisition cost does me no good. Maybe I misunderstood. Lets use another example. Purchase price- 40,000, cost to improve- 10,000, after repair value- 100,000. After 60 days, I’ve got $50,000 in the property. I need to cash out $50,000 based on $100,000 FMV. With documentation and appraisal review, FNMA and FHLMC will allow this. The catch, however, is that they limit you to 10 financed properties. Fewer and fewer lenders are allowing cash out based on FMV without having owned the property for 12 months. I’m looking for the few remaining lenders that don’t require seasoning or have a very minimal requirement. Does Southstar really have a 3 months seasoning issue?


12 months seasoning to used FMV

3 mos seasoning to do cash out using sales price (acquisition cost) + documented improvements.

check out www.moneyshark.com it will tell you who loans money what banks have what program! I look at it like this as a investor who is the one that should check the best loan programs? You!!! If you get stuck in a bad loan it is your own fault!

True, one should be knowledgeable. I don’t know… maybe I’m old fashion, but I put more value into establishing good banking relationships. Are you an investor or do you consult?



They’d probably limit also at 20 transactions. Couple questions:

What state(s) are the properties located in?
Can I assume good credit and DTI of less than 50%?

All properties are in Indiana. Credit is very good. All properties will have a Tenant. As long as you allow me to offset mortgage payment with all or a portion of the lease payment, DTI should be well below 50%. Last Friday I had an interesting conversation with a bank here. They will go to 89.9% cash out using appraised value. Seems like my problem is solved for now. The rate is prime + 1/2. Payment is interest only. How does this compare? Please keep in touch.