According to the Nutrition and Bodyweight section in chapter 8, you should stay on the recommended nutrition program (admittedly a bit vague; I wish he had devoted more book space to this topic) for at least 3-4 months.
The fat guys should be approaching 20% by now as well, since their diet has been about the same since the beginning; but their bodyweight should have started back up by now, as bodyfat loss has slowed and LBM increases have begun to exceed the loss.
Scale weight doesn't tell you much, but if your bodyfat isn't decreasing then you should cut carbs while maintaining a decent caloric load.The author's contention is that your body fat will normalize naturally if you're doing the program. He would say if you aren't making serious strength gains and losing bodyfat... then YNDTP (you're not doing the program).
Fat guys (not used here disparagingly) see a different result entirely, as their bodyweight doesn’t change much for the first few months. What they notice is looser pants in the waist; legs and hips staying about the same; shirts that are much tighter in the chest, arms, and neck; and faster strength increases compared to their skinny buddies. Their body composition changes while their bodyweight stays close to the same, the result of a loss in bodyfat due to their increasing muscle mass.
On the other hand, if you’re a little fluffy around the belly, you have obviously already created the conditions necessary for growth. You’ll usually start out stronger than the skinny guy, and because your body hasn’t got the problems with growing that skinny guys do, strength gains can come more easily for you if you eat correctly. You’ll still eat a lot, but don’t drink the milk, and cut your carb intake if you don’t see bodyfat levels drop during these first couple of weeks. You’ll first notice that your pants fit looser in the waist.
As far as when to stop doing the program (and really cut), I think the main consideration is not to blow your chance to take full advantage of the potential novice strength gains:
The ability to tolerate a rapid increase in load and to continue to quickly adapt slows after a few months. But during this period, don’t waste your opportunity to grow quickly. After this, the program and diet must change to reflect the reality of slower progress.