If you currently have a mortgage, you may be wondering how soon you can refinance your home loan. With interest rates still near historic lows in January 2024, many homeowners are exploring refinancing to lower their monthly payments or tap into their home equity.
But like purchasing a new home, refinancing comes with closing costs and underwriting requirements. So when is the soonest you can refinance your mortgage? Let’s explore the typical refinance seasoning rules for January 2024.
When Can You Refinance a Mortgage After Buying a House?
How long you need to wait to refinance a mortgage loan depends on several factors:
- The type of mortgage you currently have
- The type of refinance you want to get
- Your loan’s existing guidelines
- Your lender’s specific policies
Conventional Loan Refinancing Timeline
If you have a conventional mortgage backed by Fannie Mae or Freddie Mac, you may be able to refinance very soon after buying a home or obtaining your current loan.
Most conventional lenders allow you to refinance immediately if you want to adjust your interest rate or loan term through a rate-and-term refinance.
However, cash-out refinances typically require a six-month waiting period before you can tap your home equity and take cash out. Some lenders also impose a six-month seasoning rule, meaning you have to wait that long before refinancing with the same company.
FHA Refinance Seasoning Rules
For FHA-insured mortgages, the timeline varies based on your refinancing goals:
- 12 months for FHA cash-out refinances
- 7 months for FHA streamline refinances
- 6 months for FHA rate-and-term refinances
In all cases, you need a history of on-time mortgage payments over the past 6-12 months to qualify.
VA Loan Refinancing Waiting Period
The VA has similar requirements for refinancing a VA-guaranteed mortgage:
- 210 days for VA cash-out and streamline refi
- 6 months of consecutive on-time payments
Whichever timeline is longer applies.
Refinancing a USDA Home Loan
To refinance a USDA rural housing loan, you typically need:
- 12 months of ownership
- 6 months of timely payments
Some lenders may allow refinancing in as little as 6 months if you meet all other guidelines.
Jumbo Mortgage Refinancing Rules
Jumbo loans exceed the conforming loan limits set by Fannie Mae and Freddie Mac and are held by private lenders. That gives jumbo lenders more flexibility when setting refinance requirements.
Many allow refinancing a jumbo mortgage right away. But some impose their own seasoning standards, so check with your loan officer.
When Does Refinancing a Mortgage Make Sense?
Aside from waiting periods, make sure refinancing aligns with your financial goals and homeownership plans.
Here are some of the top reasons homeowners refinance their mortgages:
Lower Interest Rate
The most common motivator is getting a lower interest rate, which reduces your monthly payments and overall interest costs. Make sure to compare quotes from multiple lenders to find the best rate.
Shorter Loan Term
Refinancing from a 30-year to 15-year mortgage shortens your repayment period. You’ll build equity faster despite higher monthly payments.
Tap Home Equity
A cash-out refinance lets you access your home’s equity and convert it to cash. Make sure to leave at least 20% equity intact.
Switch Loan Types
Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM) locks in your rate long-term.
Remove Mortgage Insurance
Once you surpass 20% home equity, refinancing can help you cancel private mortgage insurance (PMI).
Divorce Settlement
Refinancing can remove an ex-spouse from the mortgage after a divorce.
What Are Typical Refinance Closing Costs?
When refinancing, expect to pay 2-5% of your loan amount in closing costs and fees. Common charges include:
- Application and origination fees
- Appraisal fee
- Credit report cost
- Title search and insurance
- Recording fees
- Attorney fees
Many lenders let you roll closing costs into the new mortgage balance so you don’t pay anything upfront. But that increases your loan amount and overall interest expense.
Refinancing Step-by-Step
If you decide refinancing is right for you, follow these steps:
1. Check your credit
Good credit scores (around 700 or higher) qualify you for the best refinance rates. Review your credit reports and fix any errors.
2. Calculate your home equity
Your equity equals your home value minus remaining mortgage balance. Greater equity provides more refi flexibility.
3. Shop and compare lender quotes
Compare loan estimates from multiple lenders to find the optimal loan program and interest rate for your situation. Get pre-qualified to verify your pricing.
4. Gather required documents
Lenders need proof of income, tax returns, bank statements, and a home appraisal to underwrite your refinance.
5. Submit your application
Once you select a lender, complete their loan application and submit all required paperwork. Endure the underwriting process.
6. Close on your new refinanced mortgage
The final step is signing your closing documents and paying any associated fees and closing costs (or rolling them into your new loan).
The Bottom Line
Understanding how soon you can refinance a mortgage empowers you to take advantage of lower rates and optimize your financial position through strategic refinancing. Review your loan type, equity, and mortgage lender policies to determine your options.
FAQs
How soon can you refinance after buying a house?
For conventional loans, you can often refinance immediately. But cash-out refinances require 6 months of mortgage payments. FHA, VA, and USDA loans need 6-12 months before refinancing.
Does refinancing a mortgage hurt your credit?
When you apply for a refi, lenders check your credit, resulting in a hard inquiry. But multiple inquiries in a short span count as one, so the impact is usually under 5 points.
Can closing costs be avoided when refinancing?
Yes, through no-closing cost refinances that roll fees into your loan amount or a higher interest rate. You can also negotiate with lenders to cover some costs.
How long does it take to refinance a mortgage?
The refinance process takes 30-60 days in most cases. It involves an application, underwriting, appraisal, and closing on your new loan. FHA and VA streamlines can sometimes close faster.
Can you refinance right after refinancing?
You can refinance again whenever rates drop substantially, but each refi comes with closing costs. Lenders may make you wait 6 months before doing another cash-out or rate-and-term refi.
