If you have a VA loan, you may wonder just how long you have to wait to refinance it. This is called the seasoning requirements or seasoning rules. Each loan program has them. They are a way to protect lenders from borrowers turning around and paying off a loan the lender just wrote for them.
In order to understand seasoning requirements, you first need to know what lenders mean by seasoning. It pertains to the amount of time that you’ve been in the home. If a lender requires 12 months of seasoning, it means you can’t refinance your loan with that program until you had your current mortgage for 12 months. Now, this doesn’t mean that you can’t try a different type of loan. For VA loans, though, there are specific seasoning requirements.
The VA Interest Rate Reduction Refinance Loan
The VA Interest Rate Reduction Refinance Loan (IRRRL), is the most common VA refinance loan. This loan program is only for veterans that have a current VA loan. If you do, and you have a timely mortgage payment history on that loan, you may be able to refinance to get a better rate, lower payment, or better term. The IRRRL program doesn’t require you to verify your credit score, income, assets, or home value.
The VA does require that you wait until you’ve made at least 6 payments before you refinance your VA loan with this program. However, they really prefer it if you’ve made 12 payments on your loan before you refinance. With 12 payments made, the VA can allow one 30-day late payment and still qualify you for the VA IRRRL. If you made less than 12 payments, the VA may allow you to refinance, but you cannot have any late payments within that time.
The seasoning period of 6 to 12 months, gives lenders a chance to see how you pay your mortgage. Do you pay it on time every month? If so, then chances are that you’ll be able to afford another loan with better terms. The longer the mortgage history that you have, the more evidence the lender can have that you can handle your mortgage.
The VA Cash-Out Refinance
Any veteran with VA loan eligibility can use the VA cash-out refinance option. If you have a VA loan now, but you want to tap into your home’s equity, this would be the program. This is also the refinance program for veterans that have another type of mortgage program but now want to use their VA home loan benefit.
The VA doesn’t have a specific rule regarding seasoning for the VA cash-out refinance. They leave it up to lender discretion. On average, lenders want to see you in your home for at least 12 months before they let you refinance it to take cash out of the equity. Typically, it takes at least 12 months, if not longer, to get the equity you need anyway, especially if you didn’t make a down payment on your VA home purchase.
Even if your home appreciates fast after you buy it, lenders typically exercise caution. They want to know that the inflated value is real and not just a fluke because there were a couple of higher-priced sales in the area. Homes typically appreciate at a steady pace, not a drastic one, so any drastic changes in value will be viewed with caution.
Seasoning Requirements After a VA Foreclosure or Short Sale
If you had to let a house go in foreclosure or short sale, you aren’t out of luck of every getting another VA loan. You may be eligible to use your remaining entitlement, if you had some that wasn’t tied up in your current purchase.
The VA has states how long you must wait to get another loan after a foreclosure or short sale:
- You must wait at least 2 years after you lose a home in a foreclosure. This gives you time to fix your credit and save money for your next home.
- Lenders have various requirements for the seasoning of a short sale. Ideally, you should be about 2 years out from a short sale, but you may find lenders that have shorter requirements.
The bottom line is that lenders and the VA want to make sure that you are ready for a loan, whether a cash-out refinance or you are trying to buy a home after a foreclosure. The more time that passes, the better your chances of securing an approval become.