Cash Out Refi Restrictions Lifted

September 17th, 2012

I have had some clients pay cash for a home for various reasons to expedite the purchase or to make the most competitive offer. They then plan to get a mortgage soon after the purchase to recoup a portion of their cash. And it used to be that if owned a property free and clear that you had to wait a least a half a year to be able to get cash back out of the home. But now there is an exception to that rule. Borrowers who purchased the subject property within the past six months are eligible for a cash-out refinance immediately if all of the following requirements are met:

Rules for a potential waiver of the 6 month cash out waiting period

•A 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 (for example tax escrows and per diem interest), and points; subject to the maximum Loan-To-Value ratios for the transaction, which is typically 80% Loan-To-Value.

•The purchase transaction was an arms-length transaction.

•Transaction must be documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. A recorded trustee’s deed (or similar alternative) confirming the amount paid by the grantee to trustee may be substituted for a HUD-1 if a HUD-1 was not provided to the purchaser at time of sale.

•The sources of funds for the purchase transaction are documented (such as, bank statements, personal loan documents, or equity line on another property).

•All other cash-out refinance eligibility requirements are met and cash-out pricing is applied (rates may be a bit higher for a cash out refi versus a no cash out refi for example).

•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.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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