Seasoning Periods for cash out Refi's?

Mortgage Brokers & Lenders
2yFollow

Seasoning Periods for cash out Refi's?

Jordan FairPro Member
New to Real Estate · Cincinnati, OH · Member since 2023 · 9 posts · 11 votes

Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you

0Reply
187 views

Most Popular Reply

Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
2y

Leverage a DSCR loan. Conventional loans jumped to 12 months seasoning which is crazy if you're completing BRRRR type deal.

1Reply
See this reply in the discussion

14 Replies

Jump to latestLatest
  • Randy Rodenhouse
    Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
    2y

    It is very specific for each scenario.  

    For example, Fannie Mae loans if an existing first mortgage is being paid off through the transaction, it must be at least 12 months old at the time of refinance, as measured by the note date of the existing loan to the note date of the new loan.  Also, at least one borrower must have been on title for at least for six months prior to the disbursement date of the new loan.

    Unlike the requirements for a cash-out refinance, there is NO seasoning requirement for a limited cash-out refinance.  A limited cash-out refinance replaces your existing mortgage with a new mortgage with better terms. The new loan is often a higher amount to help cover closing costs.  HOWEVER, in this scenario, you can pocket $2,000 or 2% of the new loan balance, whichever is less. 

    To make it even more confusing, in Feb 2023 Fannie Mae announced that it is increasing the seasoning requirement for cash-out refinance transactions from 6 months to 12 months.  That is why you are getting different answers.  Some lender are not updated.

    I am not an expert at mortgage origination so please find one TRUE expert. However, I am an expert in buying mortgage notes.  

    0Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    2y

    Leverage a DSCR loan. Conventional loans jumped to 12 months seasoning which is crazy if you're completing BRRRR type deal.

    1Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
    2y
    Quote from @Jordan Fair:

    Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you


    Hey Jordan, 

    Yes, DSCR is going to provide you with the least amount of seasoning time when it comes to your refinance. Within that, I have lenders that I work with that range from 12-month, to 6 months (most common), one that does 3 months and another that will do no seasoning as long as you can show that you completed rehab to the property.

    The biggest thing is being very up-front with the lender and try to communicate that need before you get going. That is a straightforward enough question that hopefully you will get an honest answer (but still be wary).Happy to help connect if you are looking for something.

    Good luck!

    [email protected]417-427-2612
    0Reply
  • Nate HerndonPro Member
    Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
    2y
    Quote from @Jordan Fair:

    Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you

    Hey Jordan, 30-year fixed DSCR programs that I utilize for clients have the following seasoning limits on cash-out refinances:

    -Less than 90 days: 75% LTV or 100% LTC, whichever is less.

    -90 days or greater: 75-80% LTV

    [email protected]417-605-2196
    0Reply
  • Kristen L GarnerBusiness Member
    Lender · Phoenix, AZ · Member since 2021 · 451 posts · 287 votes
    2y

    Hi Jordan! You are getting mixed info because some guidelines recently changed for conventional cash out refis, increasing the seasoning period from 6 months to 12 months. In the nonQM world there are tons of different DSCR products, all with different guidelines. There are many products with no seasoning requirement, some with 3 months, and some with 6 months. You want to make sure whatever nonQM product you are using with a no seasoning period guideline is allowing you to use the higher of the original purchase price and the appraised value though! I'd be happy to dive into some more detail if you want to DM me.

    [email protected]213-880-0434
    0Reply
  • Austin ClarenceBusiness Member
    Lender · Phoenix, AZ · Member since 2023 · 135 posts · 31 votes
    2y

    You are getting different feedback because "Cash Out Refinance" is not a specific loan program. It could be a Conventional loan where all lenders will be uniform or DSCR loan which every lender is going to be different.

    [email protected]650-906-2376
    Austin Clarence with NEXA Mortgage551 Reviews
    View Page
    1Reply
  • Khemraj Sarju Jr.
    Lender · Member since 2022 · 115 posts · 29 votes
    2y
    Quote from @Jordan Fair:

    Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you


     30 Day Seasoning 

    0Reply
  • Raul Sandoval
    Member since 2023 · 8 posts · 0 votes
    2y

    Hello Jordan,

    We do not require any seasoning period for a cash-out refinance.  Borrower can submit a cash-out refinance 1 day after purchase date.  Just sent you a connection request.

    0Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    2y

    @Jordan Fair- thanks - this depends on several variables ...is it primary residence ?  rental ?  Do you need to pull  cash out or  are you just  needing to refinance the existing loan?  Most lenders  will want to  get documentation  for how you purchased the loan ( papertrail to show you  used your own funds  to purchase it ?)

    0Reply
  • Lucas Thomas
    Member since 2023 · 111 posts · 70 votes
    2y
    Quote from @Jordan Fair:

    Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you

    Hello!

    I'm a mortgage broker who works exclusively with investors and this comes up a lot.

    There are no "Hard and Fast" rules for the seasoning period for a Refi as there are requirements on qualified mortgage (QM) products (Think FHA, Conventional, etc.), but no requirements on NonQM. Which is why you get so many different answers from lenders.

    In general however, here is some average standards that pop up.

    For a standard rate/term refi (No Cash out), they will have lower seasoning terms than a Cash out. Sometimes they have none, but usually they don't like to go below 6 months due to how loans are bought and sold on the secondary market with traditional lenders

    For Cash-outs, due to risk and appraisal issues, they don't like to go below 1 year seasoning period. Especially the appraiser issues, appraisers really don't like to move the needle that much on what the last appraiser did unless you have done major renovation which causes the property to not appraise and kill the deal. I call this "Appraiser Risk" and its very real in my experience and I usually don't advise people to refi within a year unless you have proof of major renovations.

    Short answer is.... Yes, all those terms are true, but the lenders dictate the seasoning period based on their lender guidelines.

    Quick caveat: I usually don't like lenders with no seasoning periods as they make you pay for that risk and resale fees through Discount Points and Higher interest rates. It's not free.

    L. Thomas
    1Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Jordan Fair It has nothing to do with any "laws", only the different risk appetites of individual lenders and their guidelines. Most banks today want 6 or even 12 months before they'll do cash out using new appraised value and the reason we do so many refis for BRRRR investors is because we only need 3 months to do it. Very few deals are completely renovated, value forced, and leased prior to about that time anyway so it seems to work pretty well.

    Do you have a deal that you're mid reno on right now or is this just for future reference? 

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
    WebsiteView Page
    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Jordan Fair:

    Hello everyone! Im being told different things by different lenders on seasoning periods for cash out refi's. Some lenders say 6 months, some tell me 3 months, some say me no seasoning period to do a cash out refi. Is there a general rule of thumb on timeline to do a cash out refi if you buy a property equity from the start? Are there any laws on doing a cash out within 6 months? Within 3 months? Any insight on this would be appreciated! Thank you


     Hi Jordan, 

    Conventional financing requires 12 months seasoning for cash out, as other BP posters have mentioned. 

    When it comes to DSCR financing, there is a lot more leniency in the guidelines and it is lender specific. Most DSCR lenders require 6 months of title seasoning for Cash Out Refinances. Few lenders may go as little as 90 days or 30 days depending on the amount of rehab work put into the property and the lender's final consideration of value.

    I would recommend looking at working with a broker to best assist you in your scenario. Many lenders have different ways of approaching seasoning. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    1Reply
  • Reggie NworieBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 55 posts · 40 votes
    2y

    Hi @Jordan Fair, 

    The answer will likely be a little different for each lender because everyone's guidelines around that are a little different. For a cash out DSCR refi, we do not have a minimum seasoning period if you have completed renovations on the property. Feel free to DM me if you want to discuss your scenario in detail.

    0Reply
  • Sophia Buesing
    Lender · Denver · Member since 2023 · 127 posts · 26 votes
    2y

    It depends on the lender. I know DSCR lenders that don't require seasoning. For conventional loans it is a long seasoning period.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free