Many homeowners who have been unable to sell their homes and take it off the market have been surprised by a lending rule when they go to refinance their home.
It's called the "Time off Market" rule. Because of it, many lenders require the homeowner to wait for six months after their listing expires before they will allow them to refinance. The clock starts when the application is taken, not when the loan funds.
That puts homeowners in a bind. First they couldn't sell their home, now they want to take advantage of today's record low interest rates because they plan to be in the home for a while and would like to save money but are told they can't refinance.
But there is hope as not all lenders have this rule.
At most of the big brand name banks, the rule is pretty much the same: you can't make an application to refinance a home that was listed for sale until six months after the listing expiration date (which will be documented by the appraiser).
Golf, and a few other lenders, allow refinances after a home is listed for sale by using the Fannie Mae guideline, which currently is the following:
Cashout refinance: is allowed if the LTV ratio is 70 percent or lower for cash out refi transactions. In addition, properties that were listed for sale must have been taken off the market on or before the application date.
Rate/term refi: for properties just taken off the market, you can refinance immediately with an acceptable with explanation.
FHA, VA or USDA loans: these loans are not subject to any seasoning requirements for time off the market. However, the borrower will need to provide a reasonable explanation and they must intend to retain and occupy the property for at least a year.
Most lenders are requiring homeowners to sign an 12-month intent to occupy document at closing.
There are other lenders with other rules: for example, one bank has a 90 day rule, but if you pay more in points, they will allow a refinance one-day off market.
Best practice: if a client is going to list their home and if their plan is to refinance if the home does not sell, make them aware of the "time off market" rule so they can decide of they want to complete their refinance before their home is listed for sale. Or send them to Golf
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