Here’s a detailed list of questions a mortgage loan officer (LO) might ask their broker about a cash-out refinance, along with explanations for each question:
💰 1. What qualifies as a cash-out refinance?
Explanation:
LOs must understand the difference between rate-and-term and cash-out refi. A cash-out occurs when the borrower receives cash above the existing loan payoff and closing costs—often triggering different guidelines and pricing.
🏦 2. What are the current loan-to-value (LTV) limits for cash-out?
Explanation:
Guidelines vary by loan type:
- Conventional: 80% max LTV for primary residence (less for investment)
- FHA: 80% max
- VA: Up to 90%, but with more scrutiny
- Non-QM: Varies widely
LOs ask to determine how much equity the borrower can tap.
🏠 3. Can I do a cash-out refi on an investment property or second home?
Explanation:
Yes, but with stricter LTV limits and pricing:
- Investment property: Often max LTV is 70–75%
- Second home: Up to 75%
LOs want to know options for non-owner-occupied properties.
📈 4. What are the pricing hits or rate adjustments for cash-out refinances?
Explanation:
Cash-out refis generally carry loan-level price adjustments (LLPAs). LOs ask about these to quote accurate rates, as they affect APR and closing costs.
🔍 5. How is the appraised value determined, and can I dispute it?
Explanation:
LOs may want to:
- Confirm if a full appraisal is required
- Understand if PIWs (property inspection waivers) are allowed
- Know the process for disputing low values, especially when equity is borderline.
🔄 6. Can the borrower pay off other debts with the cash-out funds?
Explanation:
Yes, many borrowers use funds to pay off credit cards, personal loans, or auto loans. LOs often ask if the payoff needs to be documented or reflected at closing.
🧾 7. Can the borrower get cash and also pay off a HELOC or second lien?
Explanation:
Yes, but this can still be considered cash-out unless the second lien was used to buy the home. LOs must classify the loan type correctly for underwriting and pricing.
📄 8. What documentation is needed for a cash-out refinance?
Explanation:
LOs ask about:
- Income verification (standard or bank statement loans)
- Asset documentation if reserves are required
- Proof of ownership if recent title changes occurred
Brokers help ensure nothing is missed during submission.
🕒 9. How long must a borrower own the home before doing a cash-out refinance?
Explanation:
Most programs require 6 months of ownership (sometimes 12 for investment properties). LOs ask this for clients who recently purchased with cash or rehabbed a property.
💳 10. What is the maximum amount of cash the borrower can receive?
Explanation:
This is based on:
- LTV limits
- Appraised value
- Existing liens
The LO needs to run numbers to calculate net cash to borrower after all fees and payoffs.
📝 11. Do cash-out refinances require reserves?
Explanation:
Depending on the loan type, occupancy, and DU findings, reserves may be required, especially for investment properties or lower credit scores. LOs ask to help prepare the borrower.
⚖️ 12. Are there seasoning rules on the current mortgage?
Explanation:
Some lenders require the existing loan to be seasoned for 6 months or longer before a cash-out is allowed. LOs ask this if the borrower refinanced recently.
💸 13. Are there restrictions on how the cash proceeds can be used?
Explanation:
Typically, no—borrowers can use cash however they want, but for VA loans or some non-QM, the use of funds might affect eligibility or documentation.
🧾 14. Can a cash-out refi be used to consolidate a first and second mortgage?
Explanation:
Yes—but depending on when the second lien was recorded and its purpose, it may still be classified as cash-out, not rate-and-term. LOs ask this to ensure proper pricing.
⚠️ 15. Will this loan be considered a “high-cost” or “HPML” loan?
Explanation:
LOs must watch APR vs APOR and points/fees to avoid HOEPA violations. This is especially important when borrowers are pulling a large amount of cash.
🔒 16. Are there restrictions on cash-out refis in Texas (Texas 50(a)(6))?
Explanation:
Yes—Texas has unique rules:
- Max 80% LTV
- Home equity liens only once every 12 months
- Strict disclosure and title requirements
LOs often need guidance on how to structure these properly.
🧠 17. What are the credit score requirements for a cash-out refinance?
Explanation:
Minimums vary:
- Conventional: 620+
- Non-QM: As low as 500, depending on program
LOs ask this when working with credit-challenged borrowers.
🕵️ 18. How long does it take to close a cash-out refinance?
Explanation:
Typically 21–30 days, but LOs may ask about current processing turn times, especially when lenders are backlogged or the borrower has a rate lock.
💳 19. Will the borrower get a 3-day right of rescission?
Explanation:
Yes—for primary residences only. The borrower has 3 business days to cancel the loan after signing. LOs must account for this in the funding timeline.
🔢 20. Can I structure a delayed refinance as cash-out or rate/term?
Explanation:
If the borrower purchased the property with cash within the past 6–12 months, and is now refinancing, it may qualify for a delayed financing exception (rate/term treatment). LOs need to structure this properly to avoid cash-out pricing.
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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