Understanding Fannie Mae and Freddie Mac’s Special Purpose Cash Out Guidelines

When it comes to mortgage refinancing, it’s essential to understand the guidelines set by Fannie Mae and Freddie Mac. These two government-sponsored enterprises play a crucial role in the mortgage industry, and MortgageDepot is proud to utilize their underwriting guidelines to ensure smooth loan approvals.

Fannie Mae’s Requirements

Fannie Mae requires that all owners of the subject property own it together for at least 12 months, except in cases of divorce, settlement, or other exceptional circumstances. This means that if you’re looking to buy out the interest of another owner through a cash-out refinance, all owners must have jointly owned the property for a minimum of 12 months. Fannie Mae’s guidelines do not impose any specific occupancy or property type limitations, providing flexibility for borrowers.

Freddie Mac’s Requirements

On the other hand, Freddie Mac has slightly different requirements for Special Purpose Cash-Out refinancing. To qualify, all owners must have lived together in the subject property as their primary residence for the last 12 months. This requirement ensures that the property is genuinely being used as a primary residence and not solely for investment purposes.

No Cash Back to the Remaining Borrower

Both Fannie Mae and Freddie Mac have a common restriction – they do not allow any cash back to the remaining borrower. This means that if you’re buying out the interest of another owner, you cannot receive any cash proceeds from the refinancing transaction. This restriction ensures that the refinancing is solely for the purpose of equity transfer and not for personal gain.

Letter of Intent and Specific Terms

In addition to the above requirements, both Fannie Mae and Freddie Mac mandate a written letter of intent and specific terms regarding the cash to the bought-out party. This ensures transparency and clarity in the refinancing process, protecting the interests of all parties involved.

Whether you’re considering a special-purpose cash-out refinance or any other mortgage refinancing, our team of experts is here to guide you every step of the way.

Contact us to discuss your property refinancing objectives.