Refinance Waiting Period Mortgage Lending Guidelines

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Refinance Waiting Period Mortgage Lending Guidelines

This BLOG On Refinance Waiting Period Mortgage Lending Guidelines Was UPDATED On October 9th, 2018

Refinance Waiting Period Guidelines

Homeowners who just closed on their homes and who are thinking of refinancing their home loans, there are refinance waiting period requirements on mortgage loans. The refinance waiting period after closing on a home loan may be different on rate and term versus cash-out refinance.

  • A home buyer cannot just close on their home loan one day and turn around an refinance their home loan the following day
  • All mortgage refinance mortgage loans needs to present a net tangible benefit to the mortgage loan borrower
  • We will discuss refinance waiting period on FHA Loans and Conventional Loans on this article

Reasons Why Homeowners Refinance Their Home Loans

Homeowners refinance there home loans for the following reasons:

  • Lower mortgage interest rates
  • So they can lower their monthly mortgage payments, P.I.T.I. (Principal, Interest, Taxes, Insurance)
  • Rate And Term Refinance
  • Change the term of their mortgage loan from 30 year fixed rate loan to 15 year fixed rate mortgage
  • Do they can pay off their loan balance off earlier
  • 15 year fixed rate mortgages have much lower mortgage interest rates than 30 year fixed rate mortgage loans
  • Or the opposite:
    • Change their 15 year fixed rate mortgage loan to 30 year fixed rate mortgage loan
    • This is because they cannot afford the higher 15 year fixed rate mortgage amortization schedule
  • Refinance FHA Loan To Conventional Loan to avoid the FHA mortgage insurance premium
  • Refinance To Get Co-Borrowers off mortgage loan
  • Refinance To Get Ex-Spouse off mortgage loan
  • Do a cash-out refinance mortgage loan

Refinance Waiting Period On Rate And Term Loans

Homeowners who need to do a FHA rate and term refinance mortgage loan have a refinance waiting period of six months from the date of the mortgage closing of their previous mortgage loan. HUD, the parent of HUD, has a fast track rate and term refinance mortgage called FHA Streamline Refinance. No appraisal nor income verification is needed on streamlines. There is a six month refinance waiting period from the day of closing to be eligible for FHA Streamline Refinance Mortgage. There is a 12 month waiting period after closing to do a FHA cash-out refinance mortgage. Maximum loan to value on FHA cash-out refinances are 85% Loan To Value.

Conventional Loans also has a waiting period:

  • Homeowners who want to do a rate and term and/or a cash-out refinance mortgage loan on a conventional loan the refinance waiting period is six months
  • On conventional Loans, the refinance waiting period is the same for rate and term and cash-out
  • Maximum loan limit on Conforming Loans is $453,100 unless the property is located in a designated high cost area

VA Home Loans And Guidelines

VA Loans allows up to 100% Loan To Value Cash-Out Refinancing on single family homes.

  • VA Mortgage Guidelines normally follow Conventional Guidelines
  • Maximum Loan Limit on VA Home Loans is $453,100 on purchases and cash-out refinances unless the property is located in a high cost area of the U.S.
  • There is no loan limit on VA Streamline Refinance Mortgages
  • Home buyers can purchase a higher priced home with VA Loans
  • However, VA will only offer 100% financing up to the maximum VA Loan Limit
  • Any amount over the maximum loan limit, borrowers needs to come up with 25% down payment
  • For example, say a buyer purchases a home for $553,100 and wants to put the least amount down
  • VA will offer 100% up to the $453,100 maximum loan limit
  • The buyer needs to come up with 25% of the extra $100,000 since VA Loan Limit caps the financing at $453,100
  • The answer to this question is $25,000 is the amount this buyer needs to come up with for down payment

Popular Reasons Homeowners Refinance Their Home Mortgages

There are many reasons why homeowners refinance.

  • The most common reason homeowners refinance is to lower their monthly payments with a rate and term refinance mortgage with a lower rate than the rate they are paying now
  • Other reasons why homeowners refinance their home loans is to pay off the home loan balance earlier by refinancing their 30 year fixed rate mortgage loan to a 15 year fixed rate mortgage loan
  • On the flip side, homeowners who have 15 year fixed rate mortgages may need to lower their monthly P.I.T.I. by refinancing their 15 year fixed rate mortgage loan to a 30 year fixed rate mortgage loan
  • 15 year fixed rate mortgage interest rates are much lower than 30 year fixed rate mortgage interest rates

Refinancing FHA Loans To Conventional Loans

FHA borrowers will always have the annual mortgage insurance premium for the life of their FHA Loan.

  • There are many areas in the country where home prices have appreciated, especially in California, Florida, Illinois, Texas, Georgia, Michigan, in the past couple of years
  • Parts of California, Florida, and Illinois have double digit appreciation in the past few years
  • Homeowners with at least 20% equity who currently have FHA Loans can consider refinancing their FHA Loans to Conventional Loans and eliminate the FHA mortgage insurance premium
  • Homeowners with less than 20% equity can also consider refinancing their FHA Loans to Conventional Loans with the Lender Paid Mortgage Insurance also referred to LPMI
  • Lender Paid Mortgage Insurance Conventional Loans does not require private mortgage insurance or PMI to be paid by the mortgage loan borrower on Conventional Loans
  • The private mortgage insurance is paid for by the mortgage lender in lieu of a higher conventional mortgage rate

Refinancing To Get Co-Borrowers Off Loan

Another major reason for homeowners refinancing their mortgage loans is to eliminate the co-borrowers and/or an ex-spouse off the mortgage loan.

  • Many times, home buyers need a non-occupant co-borrower
  • This is necessary because they could not qualify for income
  • However, once the main borrower can qualify on their own, many homeowners want to get rid of the co-borrowers off the mortgage note and refinance the mortgage just under their name

Couples who go through a divorce where one partner wants the home and the other gives up the title and rights of ownership to the home normally want their name off the mortgage note. This is one of the most common reasons for homeowners refinancing as well.

Refinance Waiting Period On Cash-Out Refinances

Refinance Waiting Period on cash-out refinances on conventional loans is the same as it is for a conventional loan rate and term refinance waiting period which is six months from the date of the original mortgage loan closing.

  • The maximum loan to value allowed on a conventional cash-out refinance mortgage is 80% LTV
  • With FHA Loans, the refinance waiting period for a rate and term refinance mortgage is six months from the date of the original closing date of the FHA Loans
  • The Refinance Waiting Period on FHA Loans is one year from the date of the original FHA mortgage loan closing
  • The maximum loan to value on a FHA cash-out refinance mortgage loan is 85% loan to value

If you are a homeowner looking for refinancing your current home, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are a national mortgage lender with no lender overlays on FHA Loans, Conventional Loans, VA Loans, and USDA Loans.

NOTE: State of Texas has a special law when it comes to Texas Cash-Out Refinancing where the state limits the maximum loan to value at 80% including VA Loans.

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