Back when I was in the mortgage industry we would get calls daily from individuals looking to cash-out some of the equity in their investment properties. Unless you are working with a local mortgage bank or credit union who is going to portfolio your loan, then you will likely to subjected to follow Fannie Mae’s or Freddie Mac’s underwriting guidelines. Plus, may lenders/investors may add their own heightened restrictions to further reduce their level of risk.
I just looked up Fannie Mae’s current Loan-to-Value guidelines for cash-out refinances on investment properties and they are:
Limited Cash-Out – 1-4 Units:
70% Max LTV and 70% CLTV
Minimum Credit Score of 720 is required.
The following is directly from Fannie Mae’s site
Underwriting and Delivery Requirements
- The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.
- The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
- Rental income on the subject investment property must be fully documented according to the Selling Guide, Part X, 402.24: Rental Income. Rental income from other properties owned by the borrower must be supported by two years’ federal income tax returns. DU messages permitting reduced rental income documentation must be disregarded and full documentation must be obtained. The borrower must complete and sign Form 4506 Request for Copy of Tax Return or 4506-T
- Request for Transcript of Tax Return granting the lender permission to request copies of federal income tax returns directly from the IRS. The lender must obtain the IRS copies of the returns or the transcript and validate the accuracy of the tax returns provided by the borrower prior to the loan closing.
- The borrower must have reserves for the subject property and for other properties currently owned by the borrower (i.e., other financed second home and investment properties) in accordance with the following section – “Reserve Requirements for Second Homes, Investment Properties, and Multiple Financed Properties.”
- Lenders must use Special Feature Code 150 when delivering mortgage loans secured by second home and investment properties that meet the five to ten financed property requirements.
Please be advised that each lender may have additional requirements and Fannie and Freddie can and do make changes to their guidelines. Be sure to ask your mortgage professional for details on their mortgage products.
You can also review current mortgage pricing and closing cost information from competing lenders and brokers serving your state using the rate table below. Please note that the rates are for primary residences and do not factor in pricing adjustments for rental homes.