Do banks refinance HMLs?

In todays market do banks allow refinancing of a home originally financed by a HML?
Does personal credit and assets become a variable in this situation or are the numbers on the home the only thing that matter?

Edited: 06/26/2010 at 07:51AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Apr 07 '09, 09:29 AM

Yes, banks do this. Be sure the HML records a deed of trust so it's a rate and term refi instead of cash out.

Yes, your credit, income and assets do matter. Moreso than the deal, assuming you're talking about four or fewer unit properties.

Edited: 06/26/2010 at 07:51AM

Jon Holdman, Flying Phoenix LLC

Jesse R

Rehabber · El Paso, Texas

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Apr 07 '09, 10:54 AM

Jon, I figured that the credit and assets wouldn't matter much because the bank now had the property to back itself. Assuming I was only refinancing the amount I owed on the HML you'd think the bank wouldn't have a problem considering the equity involved.

Edited: 06/26/2010 at 07:51AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Apr 07 '09, 12:00 PM

Sorry, that's just not how it works. You'll have to be able to qualify for the new loan. Under older rules, the bank would take the rent, subtract 25% for expenses and compare that to the PITI payment. Don't think anyone is still doing that. The new Fannie Mae rules require rental property to be on your taxes for two years before they will consider the income.

Edited: 06/26/2010 at 07:51AM

Jon Holdman, Flying Phoenix LLC

Christopher Wallace

Banker · Plano, Texas

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Apr 10 '09, 12:45 AM

jon,

If the property being refinanced is less than 75% LTV you can use the rental income without a two year history as long as you have 1-4 properties.

Edited: 06/26/2010 at 07:53AM by Christopher Wallace

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Apr 10 '09, 03:25 AM

That's the theory, but I have deal right now where that doesn't seem to be the reality. The borrowers not being allowed to count the rental income.

Edited: 06/26/2010 at 07:53AM

Jon Holdman, Flying Phoenix LLC

Jesse R

Rehabber · El Paso, Texas

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Apr 10 '09, 04:00 AM

That's what I was originally led to believe Christopher. Does it depend on the bank maybe? Any investor friendly banks out there?

Edited: 06/26/2010 at 07:53AM

Cynthia Litts

Real Estate Investor · Rolling Meadows, Illinois

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Apr 11 '09, 01:23 AM

It might help to check out the local community banks in the area of the property. They are more likely to keep their own loans which means they'll use they're own undewriting standards, not the Fannie Mae/Freddie Mac rules.

Edited: 06/26/2010 at 07:53AM

Christopher Wallace

Banker · Plano, Texas

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Apr 13 '09, 04:22 AM

I am guessing it depends on the lender. If possible I try to qualify the borrower without the rental income because of the hoops you have to jump through to verify the executed lease contract (cancelled deposit or rent checks), but it says right on the DU findings that rent can be used as long as you are below 75%. I have closed two HML refi's this month where rent was used to qualify the borrower.

Edited: 06/26/2010 at 07:54AM