Confused about the rules for refinancing after HML or private

[Tristan S.]

Hi Guys,

Currently working on a deal in Houston and looking at different financing options. I need someone to help me understand the rules and regulations around the refinancing process (into long term, conventional, fixed rate) after a private or hard money loan. I keep hearing opposite information on the subject : "seasoning", "no seasoning", "use of ARV for refi", "use of sales price", "yes it's possible", "no it does not follow general fannie mae/freddie mac guidelines".

I need to understand where the truth lies and what rules are your answers based on. 

Thanks a lot for clarifying all this.

[Upen Patel]

@Tristan S. Here are your options:

1. Rate-term refi - No seasoning. Pay off the HML, as long a the LTV based on new appraisal is at OR below guidelines. You can't get any cashout. And NO, paying off HML is NOT considered cash-out, as some are insinuating.

2. Cash-out refi - 6 month seasoning. Loan amount based on new appraisal and LTV guidelines.

In either case, make sure that the title of the property is in your name, NOT LLC. Fannie/Freddie no longer allow transfer of title from LLC to personal as part of a refi.

Alternately, you might want to buy the property using Fannie HomeStyle Rehab loan. You do 20% down and the the loan will fund 80% of the purchase + rehab cost.

Hope this clears it up. Good luck.