@Kevin Hassold These are not Texas rules, they are Fannie Mae and Freddie Mac rules. Texas has its own special rules but I am not aware of them because I'm not licensed in the state, however the cash out & rate and term rules are Fannie Mae and Freddie Mac rules.
So do all lenders have to follow Fannie Mae and Freddie Mac rules or how does that work?
They do if they want to sell the loans to freddie or fanny. If they want to keep the loan in house they can follow their own guidelines.
Which is why I believe most investors recommend working with a local community bank or just banks in general that keep their loans in house. They will have more flexibility with what they offer. If anyone knows a community bank that will refi without seasoning, please share. I had one, but they stopped.
Ok great that makes more sense thank you.
@Kevin Hassold - Yes, Your lender is correct. This 6 month rule does apply for doing a cash-out refi. Additionally, there is a LTV restriction of 75% for investment properties. For Primary, it can go up to 80%.
There are few special rules for Cashout Refi in Texas that falls under Section 50 (A) 6 but those only apply to homestead properties. So, as long as you are not refinancing your primary property you don't have to worry about this law.
@Kevin Hassold As it has been pointed out, your issue has nothing to do with Texas state law. Texas law only applies to homesteads. Fannie/Freddie both have the 6 months of seasoning before you can use the improved value.
You can borrow up to 75% of a non-owner occupied single family with Fannie/Freddie before six months using the purchase price, not the improved value. This is called delayed financing.
What you and @Michael Caine are looking for is a Portfolio loan. That simply means the lender will keep the loan on their own portfolio and not sell the loan to Fannie/Freddie. That way the lender can set their own rules, so again since non-owner occupied properties do not fall under Texas law, a portfolio lender can use what ever seasoning requirement or even have no seasoning requirement they want. But, because the loan is to be kept on the lender's books the rates/terms are not as attractive as Fannie/Freddie.
I have investors as well as our own money that make these "non-seasoned" loans to well qualified borrowers. So, yes they do exist, just a bit harder to find and more expensive.
Originally posted by @Kevin Hassold :
Is there a way around the 6 month minimum seasoning period to refinance an investment property? I was talking to a lender about BRRRing a property using a line of credit to purchase and rehab the property which I thought would get around this since it would be like purchasing the property with cash but they are still telling me that I wouldn’t be able to cash-out refi until 6 months.
They did say it is possible to refinance before the 6 month period is up but it could only be for just the amount used to purchase the property through the line of credit and not the rehab amount. Just want to make sure I am understanding the Texas rules correctly.
That is a Freddie and Fannie rule on refinancing for a conforming loan.
Maybe there is a bank that does something on a commercial basis. Or a bank that portfolios their own loans (not sure about the details on those two), but if you do a normal loan covered by Freddie and Fannie guidelines its 6 months.
@Kevin Hassold yes there is. It’s called delayed financing
See if it works for you. Here is pretty much how it works:
Buying a home with Cash
Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:
If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.
There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC
BUT you will be limited to the amount of....
Your purchase price + closing costs (costs when you purchased the home)
75% of the “After Repair Value”...
WHICHEVER IS THE LOWER AMOUNT (super important)
These rules are important to understand so here are two examples:
Example 1: If you purchased a home with $50k of cash, and put $30k of renovations into the loan, and the home was worth $100k. 75% is $75k and $50k is your purchase
price. So you could only receive $50k in your first 6 months of ownership since the
LOWER amount is your purchase price. After 6 months you could receive the full 75% of the ARV.
Example 2: If you purchased a home with $80k of cash, put $5k into the home, and the home was worth $100k. 75% would be $75k and your purchase price is $80k...so the lower amount is $75k.
When buying a home with cash you can absolutely get cash back right away but you will be limited to the lower of those two amounts.
Do you live in the same state where the property is located? If so, you should call around to some local banks and ask if the do portfolio lending with no value seasoning restrictions.
Hey does anyone have a list of some local banks in the Dallas area that will do portfolio loans with good rates? And can you share with me please
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