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Updated over 7 years ago,
Clarification on cash out refi when there's an LLC
Here's an answer I got from a lender when I questioned the rules for a cash out refi on my rental I recently deeded in to an LLC. I thought this may be helpful for others:
In regards to the question about seasoning. There are a few moving parts to your scenario.
Here are the rules.
If you are an individual and you purchase a property with cash, there is a 6 month waiting period before you can take cash out unless "the lender documents that the borrower acquired the property through an inheritance or was legally awarded the property (divorce, separation, or dissolution of a domestic partnership)."
Based on our conversation, you didn't do either of the three. What the guy is talking is this; you can refinance a property that was recently purchased, but you're going to be limited, within the first six months, to the purchase price as opposed to the appraised value, so technically he's right, but it doesn't work in your scenario.
Here's a scenario:
Many people purchase properties at discounted rates, renovate the properties and then try to use the new and improved appraised value for cash out. They can't. They have to wait six months if they want to base their new loan off the new appraised value. Because the property is in an LLC, you must take it out of the LLC
(because neither Fannie or Freddie will lend on loans in an LLC) and then wait the 6 months required to use the appraised value. Any transfer of ownership triggers the 6 month seasoning unless it's as described in the second paragraph above.
Here's the Fannie Mae eligibility matrix that's used by all lenders who sell to Fannie Mae as a basis for underwriting decisions before they add their own overlays.
https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html