Refinancing Your Loan After A Cash Purchase

I have been getting a good amount of calls from people who are buying or just bought a home with cash and now want to refinance.  The first step is to ask the question prior to buying but if you didn’t I still can help you. 

Fannie Mae and Freddie Mac who if you want the rates you see advertised are the guidelines you want your bank to be underwriting your loan to.  The problem is that they require you to own the property for 6 months before you can refinance your loan.  If you have owned the property between 6 to 12 months your refinance will be based off of the lesser of your purchase price or appraised value.  After 12 months they will go off of the appraised value.

The only way you will be able to refinance within the first 6 months is if your bank or lender is going to put the loan in their portfolio.  What that means is they hold onto the loan and it’s not being sold to Fannie Mae or Freddie Mac.  I happen to have an investor that will do that.  The interest rates are about 1% higher but if I were able to lock in a rate today at say 5.875% versus normal rates of say 4.875%, I would do it.  I wouldn’t want to risk where rates will be in 6 months.  That isn’t to say I am right or I would win that bet but it’s I just don’t like to gamble.