Best Mortgage Refinance Lenders Of August 2024 – Forbes Advisor – Technologist

The mortgage refinance application process is similar to the purchase process. You’ll need many of the same documents to verify your credit and finances, and most refinance programs require a new appraisal as well. Here’s a closer look at some of the core requirements.

Credit Score

The credit score to refinance a mortgage differs by loan type and lender. Here’s the score you’ll need for most refinance loans:

• Conventional refinance. 620
• Jumbo refinance. 700
• FHA rate-and-term refinance. Refinancing an FHA loan requires a credit score of at least 500, but lenders may ask for a score of 580 or higher.
• FHA cash-out refinance. 580 to 620, depending on what you intend to use the loan for.
• FHA streamline refinance. Borrowers can submit a non-credit qualifying application that doesn’t require a hard credit check or minimum credit score. However, a credit-qualifying FHA streamline refinance can result in a lower interest rate. To qualify, you’ll need a minimum credit score of 500 or 580, depending on the LTV ratio.
• VA loans. The VA doesn’t set a minimum credit score for VA cash-out refinance or VA streamline refinance loans, but lenders may require a score ranging from 580 to 620.
• USDA loans. USDA mortgage lenders can require a credit score as high as 640, although streamlined assist refinance loans waive the credit requirements after 12 consecutive on-time payments.

Debt-to-Income Ratio

Lenders generally accept a DTI ratio as high as 50% for conforming loan refinances, although a higher DTI will likely require additional underwriting and reserve requirements.

Non-conforming loans, like jumbo loans, may require you to have a DTI of 43% or lower. Lenders often reserve their most competitive rates for borrowers with a DTI below 43%.

Home Equity

Most lenders require having at least 20% home equity before refinancing, which is the equivalent of an 80% LTV ratio. This is a common benchmark as you can waive private mortgage insurance (PMI) with an LTV ratio below 80% and qualify for more competitive rates.

Streamline refinance programs don’t have minimum equity requirements, but you’ll continue paying mortgage insurance premiums with FHA and USDA loans.

Minimum Waiting Period

Most lenders require waiting at least six months from the closing date before accepting a mortgage refinance application. This seasoning period applies to conventional, FHA, VA and USDA loans. It allows you time to establish a positive payment history and accrue more equity, potentially helping you qualify for a better interest rate and monthly payment.

Certain loans, such as an FHA cash-out refinance, have more stringent waiting periods that can be as long as 12 months and require consecutive on-time payments.

Aside from the initial post-closing waiting period, there’s no limit to how many times you can refinance a mortgage.