Taken from Fannie Mae 2016 Guidelines,
2016 Non-Owner Occupied Cash Out Refinance Rules
Here are some recent rules and guidelines for cash out refinances on rental properties as set by Fannie Mae:
- The maximum loan-to-value is 75% for 1-unit properties and 70% for 2- to 4-unit properties. These maximums are lowered by 10% for adjustable rate mortgages.
- If the property was listed for sale in the last six months, the maximum LTV is 70%.
- The property must not be listed for sale at the time of loan application.
- The property is not eligible for a cash out refinance if it was purchased within the last six months. There is an exception for properties that meet the Delayed Financing guidelines.
Delayed Financing Rule: A rental property that was purchased within the last six months is eligible for a cash out refinance if:
- The new loan amount is no more than the original purchase price plus closing costs.
- No mortgage financing was used for the purchase, unless the financing was on another property.
- The transaction was arms-length, meaning the seller did not have a pre-existing relationship nor a financial interest in the sale besides the sale itself.
- The buyer has a HUD1 (final settlement statement) showing the purchase price and other details of the transaction.
Non-owner occupied cash out refinancing is best for above-average borrowers
Cash out loans are risky business for lenders, especially in the case of those who are not living in the homes they are refinancing. That’s why qualifications are rigorous, and you can expect more paperwork than you would from an owner-occupied or no cash out refinance.
For example, candidates must have a great credit scores and 6 months’ worth of assets to handle the mortgage on their rental and primary residences.
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Applicants will also have to present tax information, rental lease agreements, and other property income information. Finally, if you already have more than four financed properties, some lenders may not accept your loan.
Good to keep in mind, if you dont qualify conventional, our alternative loans from non – bank funds are good stop.