How Soon After Closing Can I Refinance My Home Loan?
What does the FHA loan handbook (HUD 4000.1) have to say about the waiting time a borrower has to spend in the original mortgage before applying for the refinance loan?
Part of the answer to this question may depend on the type of refinance loan you seek. For example, those who want to convert their home equity into cash using an FHA cash-out refinance mortgage loan will be required to show the lender they have made on-time payments on the original mortgage for the last 12 months or since the time the borrower acquired the mortgage, whichever is less.
But that’s not all; FHA loan rules state that the borrower must have a minimum of six months’ worth of payments on the original mortgage. So we can see that for FHA cash-out refinance loans, the minimum wait time is 180 days but contingent on the payments being made on time.
For FHA refi loans known as Rate-and-Term refinances, the loan-to-value ratio permitted on the transaction will depend on how long the borrower has been making payments on the original loan.
The maximum loan-to-value ratio (LTV) for properties the owner has occupied for 12 months is 97.5% (with a combined LTV of 97.5%). But the maximum LTV for properties where the owner has occupied the home for less than a year is 85% (but with a combined LTV of 97.5%).
Borrowers who are in adjustable rate mortgages and want to refinance into a fixed rate mortgage might want to do some planning before deciding when and how to refinance.
While it’s true that a fixed interest rate is more advantageous in terms of monthly payment predictability, it is best to compare the current interest rate being paid with the rates for FHA fixed rate refinance loans.
If a borrower is still in the introductory rate period (also known as a “teaser rate”) it may be to the borrower’s advantage to time the refinance loan to coincide with the next period of adjustment if the current rate is lower.
Much depends on the terms and conditions of your original mortgage, so you may need to discuss the timing and procedure of a refinance loan for such mortgages to get the full benefit of lower rates where applicable, as well as the stability of the fixed rate once it’s time to make the commitment to refinancing the loan.
For some, the time to refinance out of the adjustable rate mortgage is now; ask your lender what the most advantageous strategy might be based on the terms of your existing loan and the option open to you based on your credit scores and other financial data.
Do What You Can to Avoid Foreclosure
Homes Financed With FHA Loans Must Be Owner Occupied
FHA Programs for First-Time Homebuyers
Do you know what's on your credit report?
Learn what your score means.