Question about refinancincing my primary residence loan

[Ralph R.]

 Hello all.  I have several rentals, some (Most) financed through portfolio loans, and a couple through conventional and one seller finance loans.  My primary is one of the conventional loans.  Its a 15 year note, remaining balance 139K.  Im facing carpel tunnel surgery with a recovery time of maybe 3-6 months.  I don't know how much if any light duty I can get at my w-2 job, (Carpel tunnel not job related so no employer responsibility) so I thought maybe I would re-fi my house to a 30 year note to lower payments.  may or may not be necessary but I like to look ahead.  I called the bank today.  they were okay until I said I had a total of 6 loans, then they brought up the dreaded 6 months reserves thing.  then I told her I thought that requirement had recently been changed (Thank you @Chris Mason and BP!) and while I knew it was still there I thought it had been reduced.  she said yes she knew that, and would call me Monday.  My question is does the reserves rule apply to somebody re-financing an already existing mortgage, one that will almost 1/2 my payment? If so what was it changed to?  also not wanting to commit loan fraud am I required to disclose the seller finance?  my portfolio lender is in Colorado so probably won't do me much good here,  in Alaska.  I guess I could search one out if I had to.  Thanks  RR

[Jared Bouzek]

@Ralph R. It is correct that Fannie changed the reserve requirements a while back but those requirements are specific to transactions when the subject property is an investment or second home. It is somewhat of a moot point in this case because there are no reserve requirements when the subject property is your primary residence - even if you own multiple investment properties. This is a fairly basic Fannie guideline so I'm guessing you're dealing with a loan officer who either is not very familiar with Fannie guidelines or has an overlay of some form.

As a side note for any curious lurkers out there, the 10 financed property limit established by Fannie does not apply to transactions when your primary residence is the subject property either. So if you had 12 financed properties and wanted to refinance your primary residence, you could still do so with a conventional mortgage.

For the seller financing question, I am an advocate of full disclosure. In this scenario, it should have no bearing on your ability to refinance your primary residence outside of maybe some legwork by your lender to verify you've been making your payments on time because it isn't reporting to your credit bureaus. A solid loan officer and/or underwriter would probably catch this anyways if your Schedule E of your tax return will show you deduct mortgage interest payments for that property.

The only "gotcha" I could see potentially popping up in this scenario would be if your employer is aware that you might need to have surgery and be out of work for 3-6 months. If this were to come up in the process of verifying your employment, an underwriter could balk on it due to needing to show continuance of income.