How Long After a Closing Before You Can Use the Appraised Value to Get Cash Out?

By
Mortgage and Lending with The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. NMLS #241555

When someone buys a house at a discount off the appraised value, as many bank-owned or HUD homes are sold, the buyer needs to wait a minimum of 6 months before they will be able to refinance and get any equity out of the property.  More typically, the waiting period is 12 months.   

FHA refinances always have a waiting period of 12 months before any cash can be taken out.   

If a buyer wants to refinance to get a lower rate, then they will be able to refinance any time after the closing.  The only limitation is that for the first 6 - 12 months (always 12 months for FHA), the sales price and NOT the appraised value must be used to determine the loan-to-value ratio.  In other words, if a house sells today for 100K, but has an appraised value of 150K, it will be 6 - 12 months before a lender will allow the borrower to use anything other than the 100K sales price as the value of the house.

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Topic:
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Location:
Colorado
Tags:
cash out
mortgage tips

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Rainmaker
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Simon Mills
Mills Realty - Toluca Lake, CA

Interesting. Is that the same with conventional financing?

Jan 28, 2009 09:30 AM #1
Rainmaker
129,865
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Simon - Yes, this is for conventional financing. 

The confusion arises when you read the Fannie Mae guidelines. Fannie Mae allows the appraised value to be used immediately after the closing, BUT, there is no market for loans like that on the secondary market (the purchase of the mortgage backed securities FROM Fannie Mae).  If no one is willing to buy a particular loan from Fannie, then no lender is going to be able to sell that particular loan to Fannie.  So, even though Fannie Mae says, "Sure, we've got no rules against that", if there's no market for the loans, then it doesn't matter what the rules are.

The reasoning behind the refusal on the investors' part to buy these things is that the entire country is a declining market.  Everyone who is really controlling the money (Fannie Mae, Freddie Mac, Ginnie Mae - and the foreign governments who buy the mortgage bonds from them) knows that just about every house is going to be worth less next year. 

This is where the unbridled optimism of the NAR clashes with reality.  Reality is going to win every time.

Jan 28, 2009 10:38 AM #2
Anonymous
Alex

So, which is it? 6 or 12 months?

Dec 04, 2018 12:59 PM #3
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Rainmaker
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Chris Thomas

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