A recent and very important change in lending guidelines regarding cash out refinances is starting to rear its ugly head.  Bottom line is that cash out refinances are now not allowed within the first six months of a purchase transaction for all occupancy types. 

How does this affect potential buyers?  Properties that are priced to sell are receiving multiple offers, especially REO’s.  Many buyers, whether buying a property as an investment, second home, or even principal residence, are deciding to submit all-cash offers so that their offer is the strongest.  Their intention is to do a cash-out refinance immediately after the purchase, re-access the down payment, and use that money to purchase another home, or just to replenish their reserves.

This new six month seasoning period may make some of these buyers rethink the approach to their initial offer.  Not the best of news, but important to know.

Quick Clarification: Some folks think I am talking about tapping into short term appreciation or accessing equity from a property purchased under market, not the case.  This is strictly related to using the original sales price of the home as the value for purposes of the refinance during the first six months.