What does the term "seasoning" refer to in mortgage lending?

The term "seasoning" in mortgage lending refers to the length of time a borrower has had an account open or has made payments on that account. This concept is significant because the seasoning period can impact a borrower's credit profile, as lenders often look favorably upon customers who demonstrate a consistent and reliable payment history over time. For example, seasoned accounts can indicate financial responsibility, which may result in better loan terms or faster approval times.

In the context of mortgage lending, seasoning can also relate to certain loan products. Some investors and lenders may require a property to be seasoned for a specific period before allowing a cash-out refinance or before considering the property value at the time of refinance. This is an important aspect of risk assessment in lending practices.