For those of you puzzled by seasoning requirements for conventional owner occupied and non owner occupied purchases, coupled with wanting to "cash out" refinance to leverage future purchases, here are a few items of clarification based on multiple questions concerning cash-out refinances (title seasoning & valuation) so bear with me: I put this in a FAQ format.
- What is an acceptable time-frame from title transfer to complete a cash-out refinance?
- Six months for most lenders. 90 days on FHA transactions for private sellers.
- What if the transfer was via a quit-claim deed?
- The critical transaction date is when the title was recorded in the name of the current owners.
- What if the new borrower is paying off another party's mortgage that is not in their name?
- That would be a cash-out refinance, as there is no continuity of note holder
- Does it make a difference if the property is free & clear?
- No, it does not.
- Within 12 months, do you have to use the original sales price or can you use the appraised value (with REOs or rehabbed homes this is the reason for this one)?
- You can use the appraised value as long as you meet the six months season requirement - obviously, we the lender would look very closely at the appraised value and would require excellent comparable properties. Diminishing value areas are always a concern.
- Is there a difference if the home is an investment property or second home with the above questions?
- No, they are both treated the same, except that on NOO properties, a minimum of 80% is required for purchases. Cash outs are limited to 70%.
These questions have come up much more recently so I want to make sure I prepare a complete matrix from all of our investor/clients. As Fannie & Freddie may look at this a bit differently and each investor may look at this differently, you're response is much appreciated. Note that you still might find portfolio lenders who will not have the same seasoning requirements as others who sell the servicing and the loan.