Do banks refinance HMLs?

Question

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?

Christopher Wallace · Answer

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.

Cynthia Litts · Answer

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.

Jesse Ramirez · Answer

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

Jon Holdman · Answer

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.

Christopher Wallace · Answer

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.

Jon Holdman · Answer

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.

Jesse Ramirez · Answer

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.

Jon Holdman · Answer

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.