Delayed Financing Guidelines On Refinance Transactions By Homeowners
This BLOG On Delayed Financing Guidelines On Refinance Transactions By Homeowners Was PUBLISHED On May 15th, 2019
Delayed Financing Guidelines apply for home buyers who purchased home cash and are needing to do a cash-out refinance.
- Sellers often prefer cash home buyers
- The housing market has been hot for the past few years
- Bidding wars are often common
- Cash buyers with no contingencies often get the winning bid on a home bidding war
- Home prices have been rising throughout the United States
- Due to rising home prices, both the FHFA and HUD have increased loan limits
- Conforming and VA Loan Limits for 2019 is at $484,350
- HUD increased FHA Loan Limits to $317,427 for 2019 due to increasing home prices
- Another benefit with delayed financing today is that mortgage rates have been at a 2 year low
Massimo Ressa, the Chief Executive Officer of Gustan Cho Associates at Loan Cabin Inc. is a mortgage market analyst and expert in mortgage rate analysis. Here is the statement Massimo Ressa issued during the 2019 Gustan Cho Associates Quarterly Corporate Conference during the week of May 15th, 2019:
Data from Freddie Mac shows the average mortgage interest rate on a 30-year fixed-rate mortgage at Loan Cabin Inc. in November 2018 was 4.87% with 0.5 prepaid interest points. Prepaid interest points covers paying for some interest up front in order to secure a better rate. Back in 2000, mortgage borrowers were looking at a 6.94% interest rate group with more than a point paid upfront, on average, for the same mortgage loan program. So why not use a mortgage to buy your house and find another use for your savings? What if you invested that money? What if you had major renovations for your new home in mind? The good news is you can get the best of both worlds with delayed financing: cash-out refinance mortgage for recent cash buyers.
In this blog, we will discuss the Delayed Financing Guidelines. We will also discuss how cash-buyers can benefit from delayed financing. Delayed financing guidelines apply for home buyers who purchase home cash in the past 6 months.
What Is Delayed Financing
Fannie Mae and Freddie Mac set up Delayed Financing Guidelines for home buyers buying property cash to be able to refinance a home in less than the 6 months waiting period required.
- Conventional Loan delayed financing exception allows property owners to do a cash-out refinance prior to waiting the six months required
- In 2011, Fannie Mae set up Delayed Financing Guidelines that enable home buyers who purchase property cash to reimburse themselves up to 100% of their home purchase costs with conventional loans
- Delayed Financing Guidelines on cash-out refinance mortgages apply for owner-occupant, second homes, and investment properties
- Fannie Mae Guidelines on cash-out refinance mortgages require a six-month waiting period from the date of the initial home purchase
- With Fannie Mae Delayed Financing Guidelines, the six-month waiting period requirement on cash-out refinance mortgages on conventional loans are waived
- This holds true if the buyers did not open up any other loans since the home purchase
- This is called the Delayed Financing Exception which means it is an exception of the cash-out refinance guidelines
If a home buyer has owned the property for six months or longer, Delayed Financing Exceptions do not apply.
Qualifying For Delayed Financing
Delayed Financing Guidelines state that the home purchase transaction needs to have been an arms-length transaction.
- What this means is that the home buyer cannot be purchasing the home from a family member and/or have a non-arms length home purchase transaction
- The types of properties that qualify are owner-occupant primary homes, second homes, and investment properties
- Certain trusts, Limited Liability Companies, and partnerships may qualify and be eligible
- Property owners cannot have any liens by a lender such as a cash-out mortgage, HELOC, and/or other liens on the property
- Proof that the property has no other liens needs to be provided
- Lenders will run a nationwide third-party public record search to confirm
- Documentation on how the home buyer purchased the home will be required
Funds of the cash purchase need to be documented by legitimate sources such as the following:
- Bank Statements and/or investment accounts
- Personal verified funds that can be documented such as a bill of sale
- HELOC and/or cash-out refinance mortgage from another property.
When using an unsecured loan or loan secured by another asset, restrictions may apply.
Freddie Mac Delayed Financing Guidelines
Being on a title for the past six months is required when it comes to cash-out refinance mortgage guidelines. There are exceptions to this rule:
- The property was inherited
- The property was legally awarded to the current property owner
- No financing was used to acquire the property
- The property needs to be lien free
- Original documents from home purchase closing
Seasoning Versus Loan To Value
The following rules apply:
- Greater than 90 days 80% loan-to-cost
- Greater than 90 days for the full appraised value
- Have options with no seasoning requirements
For more information on Delayed Financing Guidelines, please Read Our Blog On Delayed Financing