I purchased a SFH in through my landtrust in February of this year. I own it outright and I net $700 a month (including water bill, taxes, and property manager). I deeded it over to my sister at time of purchase and I’m wondering if she can do a cash out refi? Or is there a minimum amount of time the place needs to be deeded over to her before that is possible.
Bought the place for under 20k in foreclosure, put about 25k into it. It’s probably worth 80k on the open market right now. Thoughts? Thanks
Most HML’s will look at the price of foreclosures around you…How much you put into the home is irrelevant to a HML…I know it sounds odd but incase of a default the property will have to be sold fast and if there are x amount of foreclosures at 25k-40k around the property they wont value the property more than a median price of all the recent foreclosures around you…How much and what kind of high end renovations you put inside do not matter…Comps and recent sales on your block matter…On the other hand if your property is the rarity and there isnt many foreclosures around and you have strong comps in the area and recent sale prices are 80k+ you may have better luck…It all depends on the comps…I dont think any HML can answer your question without looking at recent sales and or comps on the same block or within an 1/8th of a mile…Forget guidelines and using comps and recent sales 1.5 miles away…HML’s do not use that inflated type of pricing…In the best case scenario lets say some HML does value your home at 80k,you are looking at %50 LTV loan…Probably a 40k (1 year or six month loan) at anywhere from %10.99 to %15 interest plus 3-7 points plus closing costs…Generally the smaller loans are hit with the higher rates and points…
Here is my experience with this question as it relates to a conventional loan ie Fannie Mae or Freddie Mac, as well as an FHA loan.
Conventional/Fannie/Freddie - lenders each have their own credit overlays that in most cases are tougher than the actual guidelines, but here is what the guides say - Cash out is allowed if owned for 6 months or more. Again each lender can make their guidelines tougher so some could be as long as 1 year.
I assume that property is owner occupied by your sister, but here are the LTV’s depending on occupancy…80% owner occupied or 75% investment.
FHA’s guidelines state that if the property is owned less than 1 year, then you will be using the lesser of the purchase price or the appraised value to determine the max. loan amount. The max. cash out with them is 85% LTV and the property must be owner occupied. If the property is owned 1 year or more, then the LTV is 85% of the appraised value.
I hope this helps.