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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127684  
Subject: Cash out refi on recent purchase Date: 2/13/2013 1:14 PM
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Any one see issues in getting a loan approved under the following scenario? Primary home purchased for cash in January, source of funds is from sale of previous primary residence, and both sale and purchase are documented with HUD1s. Application taken in Feb., representing a loan amount of $400k and an LTV that < 60% of sales price.

I can't find guidelines that prevent this loan, but I seem to remember there is a seasoning requirement on ownership prior to allowing a cash out transaction. Loan receives an Accept from Fannie decision engine, but I'm not so sure. Loan would have to follow Fannie guidelines.
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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124761 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 2:44 PM
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Hi Crack'd,

I can't find guidelines that prevent this loan, but I seem to remember there is a seasoning requirement on ownership prior to allowing a cash out transaction. Loan receives an Accept from Fannie decision engine, but I'm not so sure. Loan would have to follow Fannie guidelines.

'Accept' is a Freddie determination....
'Approve' is Fannie.
Either way, if they say they'll buy the loan as you've entered it, do the deal!

There is no seasoning requirement on cashout after a purchase... but there may be cashout LTV restrictions (which <60LTV is below, in any & all cases,) and there are certainly seasoning restrictions for the purposes of using a higher appraised market value over the executed contract purchase price...

FYI, at least one portfolio bank rep I just asked told me they'll allow "same as purchase" refi terms (in other words, 95% cashout) up to 6 months after cash purchase.

Luck!
Dave Donhoff
Leverage Planner

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124762 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 3:01 PM
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Primary home purchased for cash in January, source of funds is from sale of previous primary residence, and both sale and purchase are documented with HUD1s. Application taken in Feb., representing a loan amount of $400k and an LTV that < 60% of sales price.

You're probably well aware already, but just a reminder that to be for this loan to be treated as acquisition debt for income tax purposes you have time limit hoops to jump through. The most straightforward is to close on the loan within 90 days of closing on the purchase.

Details are in IRS Publication 936.

Phil
Rule Your Retirement Home Fool

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124763 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 3:33 PM
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Thanks Dave. Yes, I've submitted the loan to underwriting, but I don't have the 100% confidence that I do on other loans I submit. While I'm happy to hear you also believe it meets Fannie guidelines, there may be an internal overlay condition that could trip me up. But it's good to know that if I can't get it done, I can refer it out.


Phil, yes I'm aware of the tax implications. A discussion of this topic with the homeowner is the cause of him entering a loan application. For him, a profitable stop at the local pub, and a chance encounter with a Loan Officer in the bar stool next to him. He had planned to wait a year or two before placing any kind of financing on the home.

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Author: CCinOC Big funky green star, 20000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124765 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 3:39 PM
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The best priced lender to send this loan to is United Wholesale Mortgage.

http://www.uwm.com/products/elite/

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124768 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 4:39 PM
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For him, a profitable stop at the local pub, and a chance encounter with a Loan Officer in the bar stool next to him. He had planned to wait a year or two before placing any kind of financing on the home.

And Mom told me Demon Rum could lead to nothing but bad. Hmmm. Now I wonder about that going blind stuff.

Phil
Rule Your Retirement Home Fool

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124769 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 5:20 PM
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And Mom told me Demon Rum could lead to nothing but bad.

I was more heavily influenced by dad and four brothers. Some of their thoughts on drinking also included dating advice, which was:

Candy
Is Dandy
But Liquor
Is Quicker

Something for those in new dating relationships to keep in mind for tomorrow.

Hmmm. Now I wonder about that going blind stuff.

I was told it's okay, until you need to start wearing glasses.

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124770 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 6:53 PM
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The best priced lender to send this loan to is United Wholesale Mortgage. http://www.uwm.com/products/elite/

That's also who accepts the credit supps to show zero (or low enough) revolving balances to calculate approvable DTIs!

Dave Donhoff
Leverage Planner

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124771 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 6:54 PM
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Crack'd,

This is a called a "Delayed Financing" Clause with Fannie Mae.

Here are the Rules regarding this issue. .

Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance. The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction under the following parameters:

• The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).
• The purchase transaction was an arms-length transaction.
• The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title search or report must also confirm no liens on the subject property.
• The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.
• All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.


Luck!
Dave Donhoff
Leverage Planner

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124772 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 7:38 PM
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Sweeeet. Appreciate you finding those guidelines, thank you. The loan I submitted can meet all those conditions.

I had thought there was some type of issue with a cash out so close to a purchase. But as the purchase had no financing at all, it will qualify with the updated guide. Glad Fannie amended the guidelines.

I can already foresee an initial decline, me challening the u/w decision, and subsequently having the loan approved. I love those situations. Handled gracefully, everyone learns something new, and a deeper trusting relationship is formed between loan officer and underwriter. Yet, not quite as strong as the moon and the deep blue sea. That just doesn't happen with underwriters, they always have a smidgen of distrust of loan officers. The underwriter assiged this file is reasonable, she and I get along well thru email. Tomorrow, I think I'll visit the processing center, and bring her a bottle of liquor.

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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124773 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/13/2013 9:35 PM
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I actually a few months ago did a cash out refinance on a property I had purchased for cash. I was told that I could not even apply for the cash out until 6 months after the original purchase had closed. I thought that it was indicated to me that this was a Fannie requirement, but it might have been a Texas Home Equity Loan requirement. In Texas, I had to meet Texas Home Equity Loan requirements. Under those requirements I could have only borrowed up to 80% of the value of the home, although in my case I was borrowing well under that so it wasn't an issue.

The loan closed about 9 months after the original purchase and the value of the home was appraised at higher than I paid for it. (My recollection was that for that to occur the loan had to close more than 6 months after the original purchase - it didn't really matter though since I still had so much equity in the property).

(I was aware of the fact that not all interest I pay will be deductible but since my deductions will not typically exceed the standard deduction, that didn't really matter.)

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124774 of 127684
Subject: Re: Cash out refi on recent purchase Date: 2/14/2013 3:48 PM
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I was told that I could not even apply for the cash out until 6 months after the original purchase had closed. I thought that it was indicated to me that this was a Fannie requirement,

Hi D.M, thanks for the info. I can understand why the Loan Officer thought it didn't make sense for you to apply, as it appears there once was a Fannie guideline requiring 6 months of seasoning. It now appears the guidelines have been loosened.

I'm now confident the borrower I'm working with will be able to complete the new loan within the next 30 days, even though he purchased last month. Glad it's a refi. Had this been a purchase I would have done much more due diligence before submitting the loan app. Purchase loans have the potential to be stressful. I'll never allow a refinance to cause sleep loss.

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