Most lenders require a credit score of 620 to refinance a conventional loan. FHA loans have an average minimum credit score of 500, but most FHA-approved lenders set their own credit limits. To get the best refinance interest rates, it's important to get your credit in good standing before refinancing. The minimum credit score for refinancing varies by lender and type of loan.
For example, you need a minimum credit score of 580 to refinance an FHA loan or 620 to refinance a conventional loan. However, some lenders may set a higher minimum, such as 600 for FHA or 640 for conventional loans. Refinancing your mortgage can be a great way to get better terms, such as a lower interest rate or reduced monthly payment. Just like when you applied for your first mortgage, your credit score is often a determining factor in getting approved for refinancing.
However, there are also some government programs that accept lower credit scores or have no specific credit requirements, meaning you may be able to refinance even if you have a poor credit history. The exact credit score you'll need will vary depending on the lender, the type of loan, and your financial situation. Generally speaking, the higher your credit score, the better your rate will be. Conventional mortgages are issued by banks, credit unions, and other lenders and are then sold to government sponsored entities such as Fannie Mae and Freddie Mac.
FHA loans are issued by FHA-approved and insured lenders and are easier to obtain than conventional mortgages. The Department of Veterans Affairs (VA) helps the military, veterans and eligible surviving spouses to buy a home with VA loans that are provided by private lenders and backed by the VA. The Department of Agriculture (USDA) helps rural borrowers buy homes with loans that don't require a down payment and are provided by USDA-approved and USDA-backed lenders. When looking for the best mortgage refinance lender for your needs, it's important to compare the options of as many lenders as possible.
This makes it easier for you to find the right loan for your needs. Ultimately, the exact requirements for refinancing your mortgage will vary widely depending on the lender you work with, the type of loan you have, and the government programs you apply for.