Does mortgage seasoning affect terms or just size of loan?

Question

I just bought a new home with a good down payment, and because it came from a relative, under market value. Together, it leaves me with a + difference of about $150K between the appraisal value and the balance on the mortgage. Now I'm considering getting an equity line for about 40-50K to do some renovations and pay high interest debt, but I wonder how mortage seasoning rules would apply in this sort of situations. Does seasoning affect strictly the percentage of the value you can borrow, or does it also affect the terms? In this case, I'm only interested in getting a line for partial value...does that make any difference?? Thanks!

Answer 1

On a refinance, most lenders allow you to use the value from the appraisal. You can use an old appraisal if it is less than 6 months old (but check with the lender) but in most cases you will need a new appraisal.

Some lenders require you to own the home for 6 months to use the appraised value - this is called seasoning.

If you are taking cash out - there will be adjustments to the rate if the total loan to value is above 75%. A rule of thumb is that the rate goes up by 1/8th of a point for each 5% above 75%. Above 90% LTV cash out, the rate goes up alot more - and you can use up to 100%.

You can take cash out for any reason on refinance - to consolidate debt, home improvement, or just to put in the bank.

Best Regards,
Jossi J Edwards
Omega Professional Realty, Inc.
404-427-0062
http://jossiedwards.point2homes.biz

Answer 2

Seasoning is just that seasoning. How long has this person had the mortgage on this property? Is the mortgage seasoned?

The reason for this being done by a lot of lenders is because of the situation you are in. You got a creme deal from a relative, thus lots of equity.

The lender now don't want to lend you money with no seasoning because how does he know you are not just borrowing the money to get money out the house and never repay it.

There are some that will allow you to borrow without seasoning, just be careful of the interest rate. They are taking a bigger risk, so they charge more interest.

If you did not really need the funds immediately you should hold off for at least 6 months, a year would be better but at least 6 months would indicate that you were serious about staying there and not pulling all the equity out after which you desert the place.

I don't know that the others are speaking off.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

All you can do is shop around. I found a credit union to lend me based on full appraised value only 2 months after purchasing my home. I got an equity line, in that case. And seasoning shouldn't impact what terms are available. It'll be either all or nothing, in most cases.

With that amount of equity, finding someone to lend to you shouldn't be too hard. You just need to call enough places to find one that won't limit you. Some have no seasoning limits, some are 6 months, some require 12 months, some will let you use 10% gain immediately, etc... It varies substantially.

Answer 4

Many lenders will only give you credit for the purchase price for the first 6-12 months. However, there are several lenders that do not have a seasoning requirement at all. It mostly depends on your credit rating for the no seasoning lenders. Bank of America has no seasoning requirements for one, but you have to be an A- paper borrower to qualify.

Answer 5

After you purchase a home, the lender will typically use the purchase price as the value for the first 6-12 months. After this seasoning period, you can use the appraised value rather than the purchase price.

Answer 6

Yes and no. You will simply be limited in the loans you can choose from. Some loan programs demand that there be seasoning, while others do not. Many of the programs that do not have worse loan terms for houses with high LTVs (loan to value ratio). You will be limited in the programs you choose,but in your case it seems as if you have good equity and should not be effected. Respond if you need help finding a good program.

Answer 7

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Answer 8

don't know