The Quick Read: Fannie Mae allows cash-out refinances on investment properties, but a file has to clear several separate tests: time on title, the age of the loan being paid off, financed-property counts, and the borrower’s personal income and debt. A DSCR cash-out is a different product with its own rules, set by each program rather than by the agency.
- Agency cash-out has two clocks: six months on title and a 12-month note age on the loan being paid off.
- Agency underwriting runs on the borrower’s personal income and debt ratios, not the property’s rent.
- Financed-property counts, more than credit, tend to push active investors out of agency cash-out.
- Delayed financing can waive the title clock for all-cash buyers, but it returns cost basis, not post-rehab value.
- Across Lendmire’s wholesale network, a DSCR cash-out generally tops out around 75% LTV with about 6 months of seasoning, subject to lender guidelines.
Agency rules matter because most investors hear “Fannie Mae” first and ask the question second. This piece walks through how the agency path works, where it breaks for investors, and when the file belongs in a different product. For the full picture of the alternative, see Lendmire’s complete DSCR loans guide.
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What Does Fannie Mae Actually Allow on an Investment Property?
Fannie Mae permits cash-out on investment properties. Under Selling Guide B2-1.3-03, the transaction pays off existing mortgages with a new first mortgage on the same property. It can also be a new mortgage on a property with no lien.
Leverage is tighter than on a primary residence. Fortune’s investor explainer reports caps of 75% LTV on a one-unit investment property and 70% on two to four units. The agency’s own eligibility matrix is the place to confirm the current table before sizing any file. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Reserves come into play too. On files run through the agency’s automated underwriting, six months of reserves is required when debt-to-income exceeds 45%. Cash pulled out at closing does not count toward documenting those reserves.
How Underwriting Treats the File, Step by Step
An agency cash-out file moves through six checks. Each one can stop it.
1. Classify the loan. It is cash-out if it pays off liens and returns equity or other cash. The guide lists acceptable uses, including paying off subordinate liens of any age.
2. Check the title clock. At least one borrower must have been on title for six months before the new loan’s disbursement date. Evidence is the deed, mortgage statements, and settlement statements.
3. Check the note-age clock. An existing first mortgage must be at least 12 months old, measured from its note date to the new note date. This does not apply to subordinate liens being paid off.
4. Check the property. Under an older version of the guide, a property listed for sale had to be off the market by the new loan’s disbursement date. Confirm the current wording before relying on it.
5. Check the borrower. Reserves and credit depend on the number of financed properties, LTV, and debt-to-income. Because agency underwriting runs on personal income, the borrower’s whole file decides the outcome.
6. Size the loan. The loan is capped at the LTV limit against appraised value.
Rent still matters on the agency side, and appraisals on small rental properties use the single-family comparable rent schedule (Form 1007) or the small residential income property report (Form 1025). But rent feeds the borrower’s debt-to-income picture. It is not the test itself.
The Two Seasoning Clocks, Side by Side
Most confusion on agency cash-out comes from treating two separate clocks as one. They measure different things.
| Clock | What it measures | Length |
|---|---|---|
| Title seasoning | Time a borrower has been on title | 6 months |
| Note age | Age of existing first mortgage | 12 months |
| Subordinate liens | Payoff of second liens | No note-age test |
An investor who bought with cash and sits past six months clears the title clock and has no first mortgage to age. An investor who bought with a loan six months ago clears title but fails note age. Different problem, different fix.
Where the General Rule Breaks
Delayed financing. The exception waives the six-month wait for buyers who paid cash. Per the archived guide text, the original purchase must be arm’s-length, and a settlement statement must confirm no mortgage financing was used. The purchasing entity can be a natural person, an eligible revocable or land trust, or an LLC or partnership the borrower owns 100%. Fortune notes the new loan cannot exceed the documented initial investment plus eligible financing costs. Proceeds track cost, not post-rehab value. Check the current guide for present wording.
Inheritance and legal awards. The six-month wait is waived for property acquired by inheritance or awarded in a divorce, separation, or dissolution of a domestic partnership. Again, confirm against the current text.
Hard-money exits. Here’s the catch. A hard-money or bridge loan used to buy or rehab is a first mortgage, so the 12-month note-age rule can block a quick refinance out of it. Delayed financing generally does not rescue a loan-funded purchase, because the cash-purchase condition fails.
LLC-held property. Agency lending is built around individual borrowers. Delayed financing allows a borrower-owned LLC to hold the original purchase, but the file has to be structured with title and borrower alignment in mind. Confirm entity treatment with the lender before the file is built, not after.
The financed-property cap. This is the edge case that ends most active investors’ agency path. Under Selling Guide B2-2-03, the count covers one-to-four-unit residential properties where the borrower is personally obligated. A multi-unit property counts once, and a financed principal residence counts too. Commercial real estate, five-plus-unit multifamily, timeshares, and vacant lots are excluded. The limit counts properties, not mortgages.
Key Terms Defined
Cash-out refinance: A new loan that pays off existing liens and returns equity or other cash to the borrower.
Title seasoning: The time a borrower has held title before a cash-out loan can be disbursed.
Note age: How old the existing first mortgage is, measured note date to note date.
Delayed financing: An exception that lets an all-cash buyer borrow against the property without waiting out the title clock.
Reserves: Liquid funds, usually counted in months of the full monthly housing payment, held after closing.
DSCR: Debt service coverage ratio, meaning the property’s monthly rent divided by its monthly principal, interest, taxes, insurance, and any HOA dues.
What the Investor Decision Looks Like
The agency path suits a narrow profile: a borrower with strong personal income, few financed properties, a property held long enough to clear both clocks, and no hurry. Agency cash-out also carries pricing adjustments tied to LTV and credit score, so the cost side needs a look before the eligibility side.
It stops fitting when any of these show up:
- The portfolio is large, and the financed-property count is near the limit.
- The borrower’s personal debt-to-income is thin even though the rental covers itself.
- The property is in an LLC the borrower wants to keep.
- The deal is a BRRRR with a loan-funded purchase, and the note-age rule blocks the exit.
Then the question changes from “can I clear agency rules” to “does this property’s rent carry the loan.” That is the DSCR test. A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Agency seasoning and leverage rules do not apply to it. Each program sets its own.
Across Lendmire’s wholesale network, the typical DSCR cash-out profile looks like this:
- Leverage: cash-out tops out around 75% LTV on standard rentals. A rate-and-term refinance with no cash back can reach higher, up to roughly 85% LTV.
- Seasoning: about 6 months of ownership, measured from title recording, is the common expectation.
- Coverage: 1.00 is where select programs start. It is a floor for specific programs, not a universal standard. Stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Credit: a 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers.
- Reserves: commonly around 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000.
- Loan size: up to $3,000,000 on standard programs, with smaller balances routed through select lenders.
Short-term rentals run on their own tier. Cash-out on short-term-rental collateral caps at 70%, against 75% on standard long-term rentals, and expect a 640-plus score and about 12 months of hosting history.
Two cautions. Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to PITIA only, and repairs, vacancy, management, utilities, and capex sit outside it. And equity available is never a guaranteed figure. It depends on rent used for lender review, the payment, reserves, and the leverage ceiling together. Manufactured homes, log homes, and barndominiums are not offered in these programs.
Picture a BRRRR investor who bought with a short-term loan and finished the rehab at month eight. The agency path hits the 12-month note-age rule. A DSCR file looks instead at ownership seasoning of roughly six months, the appraised value, and whether the new lease covers the full payment. That is the structural reason the two products sit at different ends of the same decision.
For more on the agency side, Lendmire’s piece Fannie Mae LLC Seasoning Rules for BRRRR Cash-Out Refinance covers the entity question in depth.
Common Misreadings
“Six months on title is the only clock.” The 12-month note-age rule runs separately.
“Delayed financing lets me borrow on rehab value.” It limits proceeds to documented cost plus eligible costs.
“The financed-property limit means a cap on loans.” It counts properties where you are personally obligated, and multi-unit properties count once.
“Agency rules apply to DSCR loans.” They do not.
Frequently Asked Questions
Can I do a Fannie Mae cash-out refinance on a rental property I just bought with a loan?
Usually not right away. One borrower needs six months on title, and any existing first mortgage must be 12 months old. A loan-funded purchase generally cannot use delayed financing, since that exception is built for cash buyers.
Does delayed financing let me pull out my rehab costs?
Only documented ones. Fortune reports the new loan is capped at the initial investment plus eligible financing costs, so post-rehab appraised value does not raise the proceeds.
Does the financed-property limit mean I can only have a set number of mortgages?
It counts properties, not loans. Per the Selling Guide, one-to-four-unit properties where you are personally obligated count, a multi-unit building counts once, and five-plus-unit multifamily is excluded.
Do agency seasoning rules apply to a DSCR cash-out?
No. Seasoning on DSCR files is set by each program. Across Lendmire’s network, about six months of ownership is the common expectation, subject to lender guidelines.
Why do active investors move to DSCR for cash-out?
Agency underwriting leans on personal income and the financed-property count. A DSCR loan is reviewed primarily on the property’s own rent covering the payment, so portfolio size matters less.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire’s investment cash out refinance Fannie Mae calculator offers an illustrative estimate only, not a quote.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review, which works for self-employed operators and investors with larger portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03
2. Fortune investor explainer on cash-out refinancing
3. Fannie Mae B2-1.3-03 (02/01/2023 archive)
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.