Seasoning for conforming Rate-And-Term (no cash out) refinance

9 Replies

Are the terms/requirements/guidelines for a conventional/conforming Rate and Term refinance different than a cash-out refi?  Not asking about the differences in the product/concept, I've got that.  Also, not talking about portfolio lending.  Looking for answers that apply to conforming, conventional Fannie/Freddie loans.  Wondering about differences in underwriting guidelines between Rate and Term and cash-out.  Specifically:

Seasoning:  Specifically, if I have a hard money/private loan for 75% of ARV, can I do a Rate and Term refi to pay off that loan without 6-month seasoning period? Any seasoning at all? Shorter? Longer?

Refinancing out of an LLC:  In this post-continuity of obligation era, properties generally have to be held personally for six months to get a conventional refi where there is a mortgage involved (I've heard there are lenders who don't require this, but I have yet to find one who's not wanting to do a portfolio loan - send me your references if you've got one!)? Are the rules more relaxed for rate and term? Can you transfer title from the LLC to a personal name at close like you could in the good ol' days?

Thanks everyone! Looking forward to your ideas!

@Ryan Johnston For a rate-term refi there is no wait period. You can do it 1 day after settlement.

No way around the seasoning requirement if you want conventional loans. If you can doing the refi within the 1st 6 months of purchase, then you can do it as a delayed financing, but for that you have to buy the property in cash. Cash means no lien against the property. You are free to use funds from HELOC, private loans, HML by putting up another property as collateral, etc. The subject property has to be free o liens.

Good luck.

Originally posted by @Ryan Johnston :

Are the terms/requirements/guidelines for a conventional/conforming Rate and Term refinance different than a cash-out refi?  Not asking about the differences in the product/concept, I've got that.  Also, not talking about portfolio lending.  Looking for answers that apply to conforming, conventional Fannie/Freddie loans.  Wondering about differences in underwriting guidelines between Rate and Term and cash-out.  Specifically:

Seasoning:  Specifically, if I have a hard money/private loan for 75% of ARV, can I do a Rate and Term refi to pay off that loan without 6-month seasoning period? Any seasoning at all? Shorter? Longer?

Refinancing out of an LLC:  In this post-continuity of obligation era, properties generally have to be held personally for six months to get a conventional refi where there is a mortgage involved (I've heard there are lenders who don't require this, but I have yet to find one who's not wanting to do a portfolio loan - send me your references if you've got one!)? Are the rules more relaxed for rate and term? Can you transfer title from the LLC to a personal name at close like you could in the good ol' days?

Thanks everyone! Looking forward to your ideas!

Since you HML loan is based on the ARV you're going to need to wait 6 months for new appraised value to hit your number of 75% LTV.

@Upen Patel, since my private loan is already for 75% of the current appraised value, could I simply do a rate and term, without delay?  I'm not looking for additional cash out - just to refi the high-interest loan to a long-term, conventional loan.

@Shaun Weekes , I'm not fully understanding.  Here's the scenario, with rounded numbers.  Let's say I have a property that was purchased fewer than six months ago, it is appraised at $100k TODAY and there's a $75k private loan on it.  I have $25k in the deal.  I'm wanting to do a rate-and-term refi whereby the $75k private loan is refinanced to a conventional loan.  No additional cash out, no need for appraisal to change.  Just want to get out of a high interest private note and into conventional.

I'm just curious: if you had 25% down to begin with, why didn't you borrow the rest conventionally on day one? Let me guess: at the time, the Private Loan was for much MORE than 75% purchase?

As I see it: that's the very reason WHY Lenders have such a thing as a seasoning requirement.

But based on what @Upen Patel wrote, so long as your Private Lender hasn't put a lien on the property (eg. an unsecured loan), you should be able to IMMEDIATELY apply for a "Delayed Financing Exception", though that would only get you 70% of their appraisal. Try that? Cheers...

Originally posted by @Ryan Johnston :

@Upen Patel , since my private loan is already for 75% of the current appraised value, could I simply do a rate and term, without delay?  I'm not looking for additional cash out - just to refi the high-interest loan to a long-term, conventional loan.

@Shaun Weekes, I'm not fully understanding.  Here's the scenario, with rounded numbers.  Let's say I have a property that was purchased fewer than six months ago, it is appraised at $100k TODAY and there's a $75k private loan on it.  I have $25k in the deal.  I'm wanting to do a rate-and-term refi whereby the $75k private loan is refinanced to a conventional loan.  No additional cash out, no need for appraisal to change.  Just want to get out of a high interest private note and into conventional.

 Whatever the purchase price was is the most you can use for value.  When you hit the 6 months you'll be able to use new appraised value which is probably what you need to get this done.

@Shaun Weekes : I understand that's the guideance re. a delayed financing refi, but that seems to be in conflict with what @Upen Patel is saying re. no wait period for rate-term.  Can you please speak to that?

@Brent Coombs : yes, the private loan was for 75% of ARV at the time of purchase, which was significantly greater than the actual purchase price. Our ARV calculation was right on the money, so the loan seems to be a good candidate for rate-term, if we can figure it out! That said, we did place a mortgage (Warranty Deed in Texas) on the property to secure the loan.

@Ryan Johnston I lend in Texas and this topic is always an area of confusion for investors. Your questions specifically could be answered differently based on the bank itself. With a conventional loan (Fannie/Freddie) banks are allowed to be MORE strict than conventional guidelines...but not less strict. So in theory, a bank could require 5 years seasoning if they wanted to. The important thing is to find a bank that doesn't have any conventional "overlays" (that's what our industry calls the extra rules that are placed on top of the guidelines). To answer your questions specifically, the conventional guidelines are that you can refinance at ARV the day after you close on the home. There is no seasoning required to do a "rate and term" refinance. A cash-out is different (especially in Texas). Just find a bank that allows that rule in whatever state you need it in and you will be good.

To refinance out of an LLC: There is also NO seasoning requirement in the conventional guidelines to refinance out of an LLC (again each bank might be different though). What most of my customers do is hold their properties in an LLC, change ownership to an individual to refinance into a conventional loan, then after the refinance is over, place the property back into the LLC. So their individual exposure is just a few days. It's a couple of forms and the title company can do the paperwork for us (I hope this makes sense in how I described this). Feel free to PM me if you are needing help in Texas and while I'm not licensed in other states I have many co-workers who are. I'm here to help. Thanks!

Originally posted by @Ryan Johnston :

@Shaun Weekes: I understand that's the guideance re. a delayed financing refi, but that seems to be in conflict with what @Upen Patel is saying re. no wait period for rate-term.  Can you please speak to that?

@Brent Coombs : yes, the private loan was for 75% of ARV at the time of purchase, which was significantly greater than the actual purchase price. Our ARV calculation was right on the money, so the loan seems to be a good candidate for rate-term, if we can figure it out! That said, we did place a mortgage (Warranty Deed in Texas) on the property to secure the loan.

 No waiting period but if you don't qualify for delayed financing you're going to have to go off the purchase price or appraised value, whichever is less within 6 month.  After 6 months you can use new appraised value.

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