Most Recent Changes With BRRR Strategy

Jerry PadillaPoster

Lender
Rochester, NY

Posted February 06, 2017 06:57

Recent changes to CASH OUT Financing;

- Cash out financing is available on 1-10 mortgages properties - (no longer a limit of 6 mortgages properties)

- Investment properties have the same LTV on properties 1-10 mortgages properties. 75% for a SFR and 70% for a MFR. - Over 6 mortgaged properties, still require a 720 credit score - (previously at 7 mortgaged properties, the required LTV dropped another 5%)

- Conforming limits increased across the board everywhere! Here is a link to see the max for your area!

Look Up Conforming Limits For Your Area!

BRRR / BRRRR....... Buy Rent Rehab Refinance..........& Repeat

CASH OUT FINANCING

A cash out refinance is exactly what it sounds like. It is when you refinance your property and pull equity out of a property. The mortgage can either be paid off free and clear or can have enough equity in the property to make it worth refinancing and pulling equity out. Cash out refinances are available on primary and investment properties.

The typical cash out financing is done after 6 months of owning the property, based on ARV and available for mortgaged properties #1-10. Please see delayed financing for less than 6 months after closing.
On a primary residence you can pull out up to 80% LTV on a SFR and up to 75% LTV on 2-4 unit multi-families.
On an investment property; A SFR if you have #1-10 mortgaged properties, you can pull out up to 75% of the equity and on 2-4 units is up to 70% equity.
On an investment property; If you have #7-10 mortgaged properties, including subject you are required to have a credit score of 720.

PROPERTIES LISTED FOR SALE
For a rate and term refinance transaction, the borrower must evidence that the listing has been cancelled, and must not have been listed for sale as of the date of the application.
For a cash-out transaction, the borrower must provide evidence that the listing was cancelled at least six months prior to the date of application.

Cash Reserves Required For Other Properties Owned by Investor;

Cash Reserve Requirements;

6 months PITI is required on subject property.

If you have 1-4 financed properties than it is now 2% of all unpaid principle balances.

If you have 5-6 financed properties than it is now 4% of all unpaid principle balances.

If you have 7-10 financed properties than it is now 6% of all unpaid principle balances.

Money must be in account for 60 days or sourced. A HELOC can be used as down payment, but not as cash reserves.

DELAYED FINANCING EXCEPTION

Delayed Financing Exception

A cash-out refinance within 6 months of a purchase transaction when no financing was obtained for the purchase transaction are allowed under the following parameters:

The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV).

1. SFR mortgaged property #1-10 - 75% LTV
2. 2-4 unit MFR mortgage #1-10 - 70% LTV

The purchase transaction was an arm’s length transaction
The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title search or report must also confirm no liens on the subject property.
The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.
Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan. Funds of gifts are not allowed with investment purchases.
All other cash-out refinance eligibility requirements are met and cash-out pricing is applied. This is allowed on primary residences, second homes and investment properties per cash-out guidelines.
- Ineligible Transactions
  The following transaction types are not eligible as cash-out refinances:
  - The subject property was purchased by the borrower within the six months preceding the application for new financing except if delayed financing guidelines are met
  - The subject property is currently listed for sale
  - The existing mortgage is a “restructured mortgage”
  - Transactions in which a portion of the proceeds of the refinance is used to pay off the outstanding balance on an installment land contract regardless of the date the installment land
    contract was executed.
  - The new loan amount includes the financing of real estate taxes that are more than 60 days delinquent and an escrow account is not established.