This just in, courtesy of Guild Mortgage:
Fannie Mae recently released new guidelines on cash out refinances for investment properties. These new rules will open the doors for a significant number of investors to re-coup their money when they purchase a property and for those who own 5 or more properties. No longer will an owner have to wait six months to get their money back when they purchased a property with their own funds. Before this change a homeowner who paid cash for a new investment property would have to be on title for six months before Fannie Mae would allow a cash out transaction for them to get their money back.
Here’s how it works. Fannie still considers it to be a cash out transaction, but as long as the owner meets the following conditions they can get their money back and help with their cash flow.
The new loan amount can be no 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/HCLTV ratios for the transaction).
The purchase transaction was an arms-length transaction.
The transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.
The sources of funds for the purchase transaction are documented (such as, bank statements, personal loan documents, HELOC on another property).
All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.
Note: The preliminary title search or report must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or HELOC (secured by another property), the new HUD-1 must reflect that source being paid off with the proceeds of the new refinance transaction
The news also keeps getting better. Before these new guidelines were implemented people with 5 to 10 financed properties were out of luck. They couldn’t do a cash-out transaction at all, regardless of how long they owned their properties, they were limited to standard rate and term refinances. The doors are now open for them as well. As long as they meet the stricter standards set for those with multiple properties, they too can get their money back.
Don’t keep this news to yourself it could open doors for more investors and those that have been stymied by the long time frames in the past.