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Mortgage Minute

Mortgage Update from Stephanie Johnston with the Johnston Team at Service First Mortgage

BIG Cash Out Mortgage Change!

For closings starting April 1st, conventional loans will require 12 months from the time of the prior loan before obtaining cash out. This previously was 6 months from purchase with no wait from the prior loan.
This means a investor or homeowner is not eligible to take cash out post any prior loan, until 12 months after the closing of the previous loan (2nd liens are excluded).
If the home was purchased in cash, the cash out wait is still 6 months.
Why does this matter? How does this affect the real estate market?
Fannie Mae & Freddie Mac (conventional lending) are making it clear they want to promote home ownership of primary purchase loans. Recent increases to pricing along with this change demonstrate that they are wanting to scale back on cash out loans.

BRRR? Buy, renovate, refinance, repeat.

This method has been used by investors to continue their portfolio growth. This rule eliminates the traditional cash out option at 6 months unless the investor paid cash (no hard money financing or other loan). 12 months is too long for most investors to wait.
Are you interesting in using this method? We have options that work around seasoning all together. But it’s important we set up this plan upfront before the initial purchase.

Cash out is limited to 80% of the value of a home.
The state of Texas does not allow FHA or VA cash out loans. This limits some borrowers from being able to take cash out of their home.
Now with these changes to ownership and loan seasoning being added, homeowners may seek to sell their home and purchase with less down to obtain cash.

For a real time specific quote, always contact us. A couple of reminders:

  • Interest rates are not one size fits all. Rates are different for each client. Some of the variables include – credit score, loan to value, loan amount, occupancy, property type, loan term, how long the rate is locked for, discount points paid, among many others.
  • One of the biggest indicators of rate is time. Rates move all day every day, just like the stock market. Over the last couple of months, we have seen this be more the case than historically.

Stephanie Johnston