Sometimes a person would finance the purchase a home with one loan program with the intention to refinance soon after. Some of the more common reasons to do so are such as the home buyer expects to receive a sum of money soon after the purchase, or the home buyer expects to improve on his credit profile and be able to get a better loan, or expects the value of the home to rise in the near future due to home improvement and remodeling, etc. Most banks require that the initial mortgage be "seasoned", or has been in existance for a period of time, before a new refinance is allowed.

In most cases, if the refinance is meant to replace the current mortgage for a shorter term or a lower interest rate, the refinance loan would have the same underwriting requirements as a purchase loan. For instance, refinancing a current 30 year mortgage with a 15 year mortgage is often treated the same a purchase money mortgage. On the other hand, a Cash-Out refinance in which the home owner withdraws from the equity built in the house has somewhat stricter qualification threshold.

In some rare cases, some lenders will create a purchase as a refinance. If you are in a lease option and have 12 months cancelled checks, you can potentially "refinance" the property based on appraised value and get a lower loan to value.

Lenders often offer better interest rate for home purchases and allow less down payments than refinance. For instance, one can easily get a mortgage of 90% of the purchase price, while a 90% refinance loan has much more stringent underwriting requirements and higher interest rate. Many banks require lower Loan-to-Value ratio if the borrower is take money out from the equity in a refinance.

In a refinance there is a 3 day right of rescission period. Whereas in a purchase, funding takes place at the settlement.

When a homeowner is looking to do a refinance transaction, the lender is required to make sure that the loan has a "net tangible benefit" to the borrower.
An example of a "net tangible benefit" would be when the borrower is taking cash-out to pay off high interest rate credit cards and lowering their monthly obligations.

Many lenders will place purchase transaction loan files ahead of refinances in their underwriting departments. This is because purchases are often much more time sensitive and frequently must ahere to a specific closing date. In a refinance transaction, although the borrower often feels time constraints, closing the loan a few days late usually does not present any hardships.

Refinancing today has become an incredibly fast and easy process compared to the first time you purchased a home.

With a refinance loan you may take cash out, if you have the equity available, lenders won't allow cash out on a purchase.