Waiting period to refinance an FHA 203k loan?

[Josh C.]

I bought a HUD property and financed the mortgage and repairs with a 203k loan. The lender told me that I had to wait a year before I could refinance and get rid of PMI. From everything I have learned on BP, I believe he lied or that he meant I had to wait a year to refinance if staying with his lending company. Does anyone know? Could I have refinanced immediately after the repairs were complete if I went to a different lender?

[Clay Manship]

@Wayne Brooks is correct--you can refinance out immediately if you wish, but you will only be able to use the "total project cost" for the first 6 months.

Example: If you buy a property at 100k, have 20k in repairs, the total project cost is 120k. If you wanted to refinance out immediately, you could, but the new lending institution would look at the total project cost as the value of the property for the first 6 months.

If you wait 6 months and 1 day, the new lender will then be able to use a new appraisal, which would reflect the value of the improvements you have made to the property, in theory, adding more equity and value.