We’ve been reading a lot about investors purchasing a large number of properties with cash. As L has pointed out, many investors have pulled out of equities and are looking for “safer” places to put their money.
Thanks to Fannie Mae now though, investors can buy a house with cash, wait a few months, then do a 100% cash out refi. Check this out:
Fannie Mae has rolled out new guidelines so that investors who’ve recently purchased a home for cash can now recoup a large portion of their investment immediately.
Cash Out without continuity: when the property is purchased for cash, the new loan is considered delayed financing, allowing the borrower to recoup the cash put into the purchase. This can be done even if the borrower owns over four financed properties.
Delayed Financing Exception
Borrowers who purchased the subject property within the past six months are eligible for a cash-out refinance if all of the following requirements are met:
- 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.
So the 100% cash out refi is not dead. So much for skin in the game.
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