Cash Out Refinance Within 6 Months of Purchasing

Fannie Mae previously had seasoning requirements for a borrower to own the home for 6 months before they could take the cash out of the property.  They have now made an exception if you bought the property using cash.  This could potentially create more sales and we could certainly use it in the Fort Lauderdale and South Florida housing market as more than 50% of sales are cash.

Here are my guidelines pertaining to his change:

Borrowers who purchased the subject property less than six months ago are eligible for a cash-out refinance if all of the following requirements are met:

·         Desktop Underwriter and Manually Underwritten loans only. Loan Prospector and Jumbo loans are not eligible.

·         The LTV/CLTV/HCLTV must be based on the lesser of the original sales price or the current appraised value.

·         The new loan amount must not be more than the actual documented amount of the borrower’s initial investment in purchasing the property plus the financing of closing costs, prepaid items and points.

·         The purchase transaction was an arms-length transaction.

o    If seller of property was an LLC, the principals of the LLC must be documented.

·         The purchase transaction is documented by the HUD-1 Settlement Statement, which confirms that no mortgage financing was used to obtain the subject property.

·         The source of funds for the purchase transaction must be documented.

·         The preliminary title search or report must not reflect any existing liens on the subject property.

·         If the source of funds to acquire the subject property was an unsecured loan or HELOC secured by another property, the new HUD-1 Settlement Statement must reflect that source being paid off with the proceeds of the new refinance transaction.

·         All other cash-out refinance eligibility requirements and cash-out pricing apply.