July 12th, 2011
Until recently, Fannie Mae guidelines required all cash buyers to wait a minimum of six months before they could obtain a conventional loan for the property. This requirement conflicted with IRS code that allows mortgage interest deduction only on loans placed within 90 days of purchase.
Fannie Mae has revised their Selling Guide and will now allow a cash-out refinance within six months of an all cash purchase.
To take advantage of the Fannie Mae revision to the cash-out waiting period, all of the following parameters must be met:
This revised Fannie Mae guideline lets buyers who pay all cash refinance with a conventional conforming loan within 90 days of the purchase and get the benefit of the IRS mortgage interest deduction.
Of course, it is still less expensive for the buyer to obtain the conventional financing during the initial purchase, but when that isn’t possible, this revised guideline is a good alternative.