Credit Score Needed to Refinance a Mortgage Loan
© 2009, Brandon Cornett. All rights reserved.
What credit score is needed to refinance a home loan in the current economy? This is one of the most common questions we get from people considering a refi. Do you need a score of 700 or higher? What else is needed to qualify? Here’s what you need to know.
What Credit Score is Needed …
- When it comes to credit scores and refinance loans, there are actually two different “cutoff” points. You will need a certain score to get approved for the refi, and you’ll need an even higher score to get the lowest rates on the loan.
- The score needed to refinance will vary from one lender to the next. One lender might approve you for refinancing with a score of 700, while another one turns you down flat. You have to apply with different lenders and compare their offers.
- Most lenders today claim that a minimum score of 660 is needed to refi, but they are quick to point out that credit is not the only piece of the puzzle. And that brings me to the next point…
- Lenders will take other factors into account when considering you for a mortgage refinance loan. For example, equity is the the biggest obstacle for most homeowners right now. In addition to good credit, you’ll probably need at least 20% equity to get approved for a refi loan.
- In most cases, a credit score of 750 or higher is needed to get the best rates on a refinance loan. You might be able to get approved with a score less than 750, but you won’t get the best rates.
- Getting the lowest possible interest rate is the key to success when refinancing. You have to lower your rate by a certain amount in order to make the whole process worthwhile. If you don’t save enough money over the life of the new loan, then it doesn’t make sense to refinance.
- If a lender tells you that your credit score is below the level needed to refinance, it’s not the end of the road. You can improve your score within a matter of months, and then you’ll have a better chance of getting approved for the loan. Here is some advice on how to do that.
- The best way to find out if you’re qualified for refinancing is to apply for a loan. Thanks to the Internet, you can do this in a matter of minutes. Use the LendingTree links provided at the top and bottom of this blog to get started. It doesn’t cost you anything to apply (in most cases), and it’s the easiest way to find out if you have the score needed for approval.
I hope you found this lesson helpful. Remember, different lenders have different criteria for qualifying borrowers. So if you get turned down by one, be sure to ask them why. They should tell you what the problem was — too much debt, score was too low, not enough equity, etc. Then you’ll know what to work on. And if you find out you don’t have the FICO credit score needed to refinance your home loan, you can use the advice on this page to improve it.
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