On a cash-out refinance where borrowers will use loan proceeds to cover the reserves requirement, will we still require a bank statement?
Yes, guidelines still require that borrowers provide 1 month’s bank account statement for all loans, regardless of if we use the funds in the account to qualify the loan.
Can borrower use the proceeds from a cash-out refinance to meet the reserve requirements?
Depends on the occupancy. On Owner-occupied, proceeds from a cash-out refinance may only be used towards reserves if 1) LTV is 70% or less; and 2) FICO is 720 or greater. On investment properties, cashout proceeds may be used towards the reserve requirement.