I know this is a newbie question, but can someone please break down the steps toward getting a cash out refinance for a property paid off in cash? What are some requirements lenders typically ask for? Is it far different from a conventional loan in underwriting? Or is it easier to get than a conventional loan? I understand some banks will look for 6 months in reserves for the property. Does this reserve amount only count monthly P&I, taxes, insurance, and maintenance? I would appreciate any insight in the matter. Thank you.
@Mel K. , I am actually going through this right now. My lender is a small local bank, which offers portfolio loans. The loans are a commercial product, with an interest rate of PRIME plus 1% (currently 4.25%). The term is a 3/3/3 period, amortized over 20 years. The 3/3/3 means the rate is fixed for 3 years, then resets at the current PRIME + 1% rate, and again at the next 3 year interval.
This bank offers an 85% cash out, based on a full appraisal. So my fees are going to be a full appraisal ($400), origination ($200), title insurance (roughly $300), and some recording fees. Total costs of probably $1200.
I would suggest making a list of the smaller local/regional banks in your area, then hit the phones and ask the commercial loan officer/VP if they offer the type of loan you are looking for, and if so, what are the terms they offer. Also ask your other investor contacts in your area where they bank and if they've done cash outs there.
Once you start hitting the phones, you'll come up with a few banks that offer those types of loans, then just pick one that has the best terms for your situation.
Cash out refinances are the same process as a purchase. The obvious difference is that you're going to get cash back based of the appraised value of your home.
The other difference is that you will need to give your Loan Officer a copy of your mortgage statement for numerous reasons.
You'll need to give the LO the following:
1040's for 2014, 2013 (All schedules and statements)
W2's for the same years
Pay Stubs for the past 30 days
2 Months of bank statements or 401K, IRA etc... (Some showing reserves)
Copy of DL & SSC (SSC if it's an FHA loan)
Terms of withdrawal if you give any assets that aren't in a bank account
If this is a purchase that is less that 6 months ago, you can cash out based on the sales price. If its 6 months or more, you can cash out based on new appraised value.
I hope this helps and if you have anymore questions I'm here to help.
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