Fannie and Freddie are NOW going to require a 12-month seasoning to do a cash-out refinance for even owner-occupied properties starting in early 2023.
I would NOT be shocked if other portfolio or NON-QM options follow these guidelines in the near future. Yes, there will be other options if you need a cash-out to refinance before the 12 months, terms/products/rates might NOT be as competitive. It seems they are really trying to slow down the market and keep money out of the system, cash out refinances were a BIG part of the refinances over the last few years.
As the market changes for better/worse we will always see changes in lending, don’t be surprised as we move forward in the coming years lending guidelines to continue to change with the market conditions.
See below for exact guidelines and what will be acceptable moving forward.
For all cash-out mortgages paying off a first lien mortgage, the following seasoning requirements must be met:
- The first lien mortgage being refinanced must be seasoned for at least 12 months (measured from the Note date of the mortgage being refinanced to the Note date of the cash-out refinance mortgage
- The original note date would be validated by the credit report or title commitment.
The seasoning requirement does not apply for the following cash-out refinance transactions:
- Loan proceeds to buy out the equity of a co-owner for an owner-occupied primary residence special purpose cash-out refinance transaction:
- When the property has been jointly owned for 12 months prior to the initial loan application; unless parties have inherited or were legally awarded the mortgaged premises.
- Fully executed written agreement by borrower and co-owner stating terms of property transfer and disposition of refinance loan proceeds
- No cash back is permitted to the borrower retaining sole ownership of the property.
- Received an accepted AUS decision and meets maximum LTV/CLTV for cash-out refinance transactions.
- The first lien mortgage being refinanced is a Home Equity Line of Credit (HELOC)
If you have any questions, please reach out to us 😊
