Credit Score To Refinance Mortgage

What Credit Score Is Needed To Refinance A Mortgage?

We discuss here the credit score to refinance mortgage. Good credit scores are crucial to the refinance process; lenders typically reserve the best rates and conditions for borrowers who have a highest numbers. While working to raise scores may yield a lower interest rate down the line, there are numerous options that may help borrowers improve their financial picture now.

The higher your score, the better your interest rate is going to be. But be careful against concentrating on credit improvement and waiting to refinance. “If you can realize savings today, go ahead and refinance. In the future, if you can realize more savings, you can refinance again. Do it instead of speculating about the future of your credit score and interest rates.”

What credit score does a borrower need?

According to FICO, credit scores generally range from 300 to 850, with anything above 800 characterized as “exceptional.” A score between 670 and 739 is considered “good,” while a number below 580 is “poor,” demonstrating a higher risk to lenders.

Credit-score requirements vary, depending on the type of loan a borrower is seeking for refinancing. In many cases, credit-score requirements can change depending on other factors like debt-to-income ratio (DTI), which is your total outstanding debt divided by your income, and loan-to-value ratio (LTV), which is determined by dividing the loan amount by your home’s current appraised value.

No cash-out mortgage refinance requirements for single-family homes

Conventional loan requirements

Who it’s for: Borrowers with one- to four-unit properties who live on-site may be able to qualify for a conventional refinance. This may also be a good option for those who currently have an FHA loan and whose credit score has risen. “If your credit score has been increasing, you may have an opportunity to refi out of an FHA loan and get rid of the insurance premium,”

How to qualify: Requirements vary depending on the DTI and the amount of equity the borrower has in the home.

  • Minimum credit score of 680 for refinances with less than 25% equity and a DTI ratio below 36%; Credit score of 700 with DTI above 36%
  • Minimum credit score of 620 with more than 25% equity for a DTI ratio below 36%; credit score of 640 for DTI above 36%
  • Maximum LTV of 97%; LTV over 80% requires private mortgage insurance (PMI)
  • Maximum DTI of 45%, inclusive of all outstanding debts
  • Lower credit scores may be an option with cash reserves
  • Additional requirements regarding cash reserves for multi-unit properties

FHA standard refinance

Who it’s for: Because of their low credit-score requirements, Federal Housing Administration (FHA) loans may be a good option for borrowers with moderate scores who are looking to refinance to a lower interest rate or to escape an adjustable-rate mortgage (ARM) that is about to adjust.

How to qualify: Borrowers must be current on their existing mortgage for at least six months. Credit scores can be as low as 500 for an LTV less than 90%; a score of 580 is required for LTVs greater than 90%.

  • Maximum LTV of 97.75%
  • Maximum DTI of 43%
  • Additional requirements regarding cash reserves for multi-unit properties

FHA Streamline Refinance

Who it’s for: The FHA Streamline refinance is specifically for homeowners who already have an FHA mortgage. A credit check is required if the new loan will cause the principal or interest rate to increase; however, this type of loan may still be a preferable option for someone who wants limited underwriting. For instance, no appraisal is ordered for an FHA Streamline refinance.

How to qualify: Borrower must have made at least six months of on-time payments on their current mortgage, and does not have to live in the home.

  • Minimum credit score of 500 on LTV under 90%; score of 580 for LTV over 90%
  • No LTV limits
  • Maximum DTI of 43%
  • Additional requirements regarding cash reserves for multi-unit properties

Cash-back mortgage refinance requirements

Conventional cash-out refinance

Who it’s for: A cash-out refinance can be a great option for those who are looking to tap the equity in their home to make improvements to the property or pay other debts or expenses. Creditworthiness is dependent on a number of factors, including income, LTV and credit score.

How to qualify:

  • Minimum credit score of 680 on refi with less than 25% equity and DTI under 36%; score of 700 for DTI above 36%
  • Minimum credit score of 660 with more than 25% equity and DTI below 36%; 680 on DTI over 36%
  • Score of 640 possible with DTI under 36% and six months’ worth of cash reserves
  • Maximum LTV of 80%
  • Maximum DTI of 45%
  • Additional requirements regarding cash reserves for multi-unit properties

FHA cash-out refinance

Who it’s for: The FHA cash-out refi is for borrowers who have at least 15% equity in their home.

How to qualify: To be eligible, borrowers must have lived in their primary residence for at least 12 months. A new appraisal must be ordered to determine the current value of the home.

  • 500 minimum credit score; varies per lender
  • Maximum LTV of 85%
  • Maximum DTI of 43%
  • Additional requirements regarding cash reserves for multi-unit properties

No-minimum-credit-score home refinance programs

FHA Streamline Refinance

Who it’s for: The FHA Streamline refi allows borrowers to refinance their loan without a credit or income check or an appraisal, making it one of the easiest loans to qualify for.

How to qualify: This type of loan is only for those who already have an FHA mortgage. The only financial qualification for the lender is determining that the borrower will have a “net tangible benefit,” which could be achieved through a lower interest rate or fees.

VA Interest-Rate Reduction Refinance Loan (IRRRL)

Who it’s for: The U.S. Department of Veterans Affairs (VA) Interest Rate Reduction Refinance Loan (IRRRL) is for qualifying military members and family with an existing VA loan.

How to qualify: VA loan holders must be able to lower their interest rate, unless they are refinancing from an ARM, and the principal and interest payment on the new loan generally must be lower than the prior loan. Generally, no appraisal, credit information or underwriting is required, which means

  • No minimum credit score or maximum LTV requirements
  • No cash reserves needed
  • No DTI limits

VA cash-out refinance

Who it’s for: Qualifying military members and their families with a VA loan and who have equity in their home may qualify for a cash-out VA refi.

How to qualify: Credit score requirements will vary by lender, however no minimum credit score is set by the VA.

  • LTV of 100%
  • Generally, maximum DTI of 41%, but may be higher, subject to lender discretion
  • Additional requirements regarding cash reserves for multi-unit properties

How to improve your credit score to get your best refinance rates

Making your payments on time has the greatest impact on your creditworthiness because, according to FICO, payment history accounts for 35% of your credit score. Whether you’re looking to refinance right away or simply want to work on improving your score, there are some simple tactics you can use.

  • Pay your bills on time and get current with overdue or missed payments
  • Pay down existing debt — credit utilization accounts for 30% of your credit score
  • Beware of opening new accounts — new credit accounts and inquiries account for 10% of your credit score
  • Don’t close accounts — this can actually reflect poorly on your score
  • Dispute incorrect information on your credit report — you might be surprised by what you find when you order your report.

Shopping for a refinance

With so many refinancing options, it’s critical to find your best resource to guide you through the process. Here are a few things to look for when shopping around for a lender:

How responsive are they? A lender that takes days to get back to you and who doesn’t stay in regular touch throughout the process can be frustrating.
Do they seem knowledgeable about your particular situation? A lender that has never done a VA cash-out refi, for example, may not be your best option.
Are they up on current rates and aware of trends and predictions? Rates can drop at any time, even when they are predicted to rise. Look for a lender that is paying close attention and is keeping you informed.


Refinancing can save homeowners money monthly, or free up a lump sum for expenses. FHA loans, VA loans, cash-out options — the choices are numerous. Knowing the credit scores and other requirements for different types of loans can help you become better-informed when weighing which type of loan best suits your needs.

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Author D Laidler

I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go.  I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.

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