How Soon Can I Refinance After Buying a House?

August 8, 2022 By , , ,

If you’ve recently bought a house, or are looking to in the near future, rising interest rates shouldn’t come as a surprise.  However, the rate you have right now doesn’t have to be the rate you have forever. If you’re looking to reduce mortgage payments, increase home equity, or refinance an adjustable-rate mortgage to fixed, you may wonder: how soon can I refinance after buying a house? Before making any decisions, consider reasons to refinance your home, and decide which is most important to you—this will help you to select the best option moving forward, whether it’s a conventional refinance, FHA refinance, VA refinance, USDA, or jumbo.

Reasons to Refinance

When you refinance, you’re essentially replacing your current home loan with a new one. For buyers who like to plan ahead, this can be a smart way to reduce mortgage payments, increase home equity, or refinance ARM to fixed rate. We’ve provided details about these reasons to refinance below.

Reduce mortgage payments

Reducing mortgage payments makes it easier for borrowers to meet monthly payments while managing other debts and expenses. If you’re concerned about paying your mortgage in the future, reducing payments now can help to relieve pressure. You can put savings toward other costs or your principal balance, which makes this a popular reason to refinance.

Increase home equity

When you took out your mortgage, a 30-year term may have made perfect sense. However, if your finances have improved, a shorter-term loan will help you increase home equity faster and own your home sooner. In addition to reducing mortgage payments, you may use that equity to pay off high-interest debt or for home repairs.

Refinance ARM to fixed

If you have a fixed-rate mortgage, your interest rate is locked in for the life of the loan; this means that your monthly payments will remain at their current amount and won’t increase. However, if you have an adjustable-rate mortgage (ARM), your rate may change. ARMs come with a fixed rate for a number of years, but when the introductory period ends, your rate will fluctuate with the market. If you’re able to refinance ARM to fixed, you’ll avoid interest rate increases that may come after the introductory period ends.

Young family inspecting home exterior on a sunny day and wondering if a conventional refinance is a good idea.

How Soon Can I Refinance After Buying a House?

If you’re asking, “how soon can I refinance after buying a house,” there are no definitive rules that state how soon you can refinance; however, whether or not you will be approved for a new home loan varies, depending on your finances and your lender’s requirements. Some loan programs allow you to refinance immediately after receiving the original loan, while others may require a waiting period, so ask your lender for an exact timeline.

Conventional refinance

Conventional loans meet qualification standards set by Freddie Mac and Fannie Mae. In most cases, a conventional refinance is possible as soon as you want. However, you may have to wait up to six months before you can refinance with the same lender. One exception is a cash-out refinance, which allows homeowners to cash in on equity they’ve accumulated. To pursue a cash-out refinance, you must have owned the property for at least six months to twelve months, depending on the loan type, unless you inherited it or it was awarded to you in a divorce or dissolution of a domestic partnership.

FHA refinance

The Federal Housing Authority (FHA) has several types of refinances, each with its own parameters.

To qualify, you must have had the mortgage for at least 210 days and have made at least six monthly payments on time, and have a consistent monthly income to cover debts, including your monthly mortgage payment. So, how soon can you refinance after buying a house if you have a loan backed by the Federal Housing Authority?

  • Cash-out. You will have to have owned and occupied the property as your primary residence for at least 12 months and made 12 on-time monthly payments prior to applying for a new FHA loan.
  • Rate and term or simple refinance. If you don’t want cash-out and you’re willing to pay for an appraisal, you may choose an FHA rate and term refinance, or FHA simple refinance. For these options, you must wait at least 210 days and make six monthly payments on time before applying for a new FHA rate and term refinance.
  • FHA streamline. This option comes with less paperwork and doesn’t require an appraisal, which makes it a faster way to refinance from one FHA loan to another. To qualify, you must have had the mortgage for at least 210 days and have made at least six-monthly payments on time before applying for an FHA Streamline refinance.

VA refinance

You must wait at least 210 days to apply for a VA refinance and have made six on-time monthly payments. This rule applies to a VA cash-out refinance and a VA Interest Rate Reduction Refinance Loan (IRRRL).

USDA refinance

USDA loans are backed by the U.S. Department of Agriculture, which offers guaranteed loans and direct loans. To refinance a guaranteed loan, you must have had the mortgage for at least 12 months. For direct loans, there is no waiting period to refinance. There are three options to refinance into another USDA loan:

  • For a streamlined refinance or a non-streamlined refinance, you must have made on-time payments for the past 180 days.
  • For the streamlined assist program, you must have been current on your mortgage payments in the last 12 months.

Jumbo loan refinance

Jumbo loans are designed to finance luxury properties and homes in competitive markets. Similar to a conventional refinance, in most cases, you can refinance a jumbo mortgage at any time. When considering a cash-out refinance, the waiting time is six months with six monthly payments made on time.

Exterior image of a new-build neighborhood on a sunny summer day.

Other Things to Consider When Refinancing

So, how soon can you refinance after buying a house? Rules aside, there are other things to consider, like how long you’re planning to stay in your home. Like your original loan, refinancing requires an appraisal and closing costs, which typically come in at around two to five percent of the loan’s value. So, you must ask yourself: will you be staying in your home long enough to recoup these costs?

Additionally, when you take out a mortgage, it impacts your credit, and if you haven’t had your home long, you likely haven’t made sufficient payments to boost your score. If you want to apply for a refinance, the lender will have to pull your credit again, which could affect eligibility or impact the rate you’re offered. These are legitimate concerns when considering reasons to refinance and reduce your mortgage payments, and if you have questions, your neighborhood Mortgage Advisor is here to help.

What’s Your Reason to Refinance?

If the time is right for you, a mortgage refinance could make a lot of sense. If you have questions or want to talk through reasons to refinance, contact your local Mortgage Advisor, or check out our blog for more home finance tips.

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