Fannie Mae Delayed Financing Exception

Have you ever paid cash for a home, then found out you need to wait at least 6 months to refinance it?

Well Fannie Mae has now come out with the Delayed Financing Exception.  You are now allowed a cash-out refinance within six months of a purchase transaction when NO Financing was used to purchase the property.  However, there are certain restrictions in order to qualify.  They are as follows:

  • The new loan cannot be more than the actual documented amount of the borrower’s initial investment when they bought the property, plus the financing of closing costs, preapid fees, and points (subject to the ltv, cltv, hcltv ratios).
  • Must have been arms-length transaction.
  • The purchase was documented with a HUD-1,which confirms that there was no mortgage financing involved to acquire the property.  The preliminary title report must verify the same.
  • The source of the original funds used to finance the property must be verified by bank statements, personal loan documents, HELOC, gift, 401k, etc).  Any loans used as the source for the purchase transaction (including gifts), will be required to be repaid and must show on the new HUD-1. ( Basically,  the funds from the new loan must be used to replenish or payoff where the funds came from including a 401k, hint hint).
  • All other cash-out refinance requirements are met and cash-out pricing is used vs rate and term.

NOT SO FAST:  Sounds great right?  Unfortunately, Fannie Mae doesn’t do loans.  They buy loans after the fact from lenders.  You need to find a lender willing to do this, and frankly, I don’t know a single lender that will allow you to refinance this way.

The bottom line:  Expect to wait at least 6 months to refinance after you paid cash for a home – no matter what you read online!.