Can you refinance a homepath mortgage?

Question

Has anyone ever done this?  This would be my goal....  Purchase a homepath eligible property as an OO that I think is undervalued through Fannie's Homepath mortgage program (3% down payment).

Then, hopefully, refinance the property with cash out; leveraging any confirmed equity that is available to pay off a couple of student loans that I still have.

I understand that there is a great deal of further discussion pertaining to the analysis of the deal, but, just wondering if anyone has ever done this?  I notice most homepath properties have a 3 month deed restriction....

Jeff B. · Answer

That's kinda what I thought.  My appraisal came back at 112k once I had the improvements completed.  Yet, they could only use a max value of 81k.  Sucks, but it is what it is...

Patrick Howell · Answer

thanks for all the information.... sounds like there is no way around the seasoning requirement then?

I know that LTV is typically established by either the purchase price or appraisal (whichever is lower).  Something just seems flawed about this to me.... If I purchased a place for 5k that appraised for 100k, most people would consider that the property has a REAL market value of more than the purchase price. (extreme example I know, but the same principle).

Rusty Thompson · Answer

I was planning a similar strategy when I found out. Ran it by my mortgage broker and  He let me know the realities. Though if you want more than 75%, FHA will loan up to 95% but u will have to pay the PMI.

Jeff B. · Answer

Yup!  I just ran into this with a rental property.  Bought it(REO), rehabbed it, then thought I would be able to refi it and pull money out.  Turns out there is a seasoning requirement of a year before I can pull any money out of it on a refi.  The most they would loan on it is 75% of the purchase price plus any upgrades I've added.  So, in my case, I bought it for 65k, rehabbed it for 16k for a total of 81k.  I could refi it provided the loan was for no more than 61k.

One possiblility, though I haven't looked into it, is if it appraises for substantially more than you paid is to get a HELOC on it and pull some of the equity out of it that way.

Rusty Thompson · Answer

The only problem you will run into is the "seasoning" requirements. I.E. this could take you anywhere from 6 months to a year before most lenders will allow it. Unless you can prove you made "improvements" that would have increased the value of the property.