Refinancing Requirements: 6 Things You’ll Need

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What do I need to refinance my home: 6 requirements

Each lender has different refinancing requirements. Understanding what is needed to refinance a home can help you prepare to be approved for the process.

Check out this table for some general guidelines, then read more about them below.










Type of refinancing

Minimum credit score

LTV max.

Maximum DTI

Assets required

Income Verification

Estimate required?

Conventional mortgage refinancing

620

75% – 95%

50%

For closing costs

Yes

Yes

FHA rates and term refinancing

580

80% –97.75%

Varied

For closing costs

Yes

Yes

FHA Streamline

580

Varied

37% –47%

For closing costs

Nope

Nope

VA refinancing rate and term

580

100%

45% – 60%

For closing costs

Yes

Yes

VA IRRRL

580

100% Unlimited

45% – 60%

For closing costs

Nope

Nope

Giant

680

70% – 89.99%

45%

Sometimes reserves are needed plus cash for closing costs

Yes

Yes

Note: These numbers are guidelines. Your exact requirements may vary depending on your lender, type of refinance, and your own financial health.

1. Credit score minimums

When applying to refinance your mortgage, lenders first consider credit scores. Each loan program has a minimum credit score requirement, but lenders also look at your credit history. For example, most lenders won’t approve your refinance request if you have a history of late or unpaid mortgage payments. They want financially responsible borrowers.

Before you apply for a loan refinance, get a copy of your credit reportand check that there are no errors or issues you can fix before applying.

2. Maximum loan to value (LTV) ratio

If your credit score meets the requirements of the mortgage program, lenders then consider your loan to value ratio. This compares the amount of your current loan to the value of the house.

For example, if your home is worth $300,000 and you have an outstanding loan balance of $200,000, your LTV is 67% and you have 33% equity in your home. Home equity is the portion of the home’s value that you own, and if you sold the home today, it’s the amount of money you would receive after paying off your loan.

Each refinance program has a maximum LTV. It is best to be at or below this number to have the best chance of approval.

3. Maximum Debt-to-Income Ratio (DTI)

Your debt to income ratio is also essential to get approved for refinancing your mortgage. Your DTI measures your monthly obligations against your gross income (earnings before taxes).

Lenders must determine your DTI to ensure you can afford the loan. The Consumer Financial Protection Bureau requires lenders to determine beyond a reasonable doubt that borrowers can afford a loan. That means they have to check your pay stubs, W-2s, and possibly your tax returns.

Most loans require a DTI of 36% to 50% to prove affordability.

4. Required Assets

Assets aren’t a major concern for lenders, but most will ensure you have enough cash for closing costs, as well as savings for reserve funds.

All borrowers pay closing costs when they refinance their mortgage. The only exception is if there is room in your loan-to-value ratio and the lender allows you to roll the costs into your loan. However, this may increase your monthly payment, so consider this option carefully.

Sometimes lenders also want reserves or money in a liquid account to cover your mortgage payment. This is especially important for jumbo loans. Most lenders require a year of expenses to cover the higher loan payment.

5. Verification of income

Lenders must check your income to make sure you can afford the loan under the refinancing requirements. The CFPB requires lenders to verify income beyond a reasonable doubt. This means providing official income documents, including pay stubs, W-2 forms, and tax returns if you’re self-employed.

Lenders use this information to ensure that you have a solid current income history and that your employment will continue for the foreseeable future, since a mortgage loan is a long-term commitment.

6. Assessment Requirements

Lenders need to know the value of your home just as they did when you bought it. A refinance valuation determines the value of the house. This allows lenders to refinance your mortgage, whether you want to lower your interest rate or take out a bigger loan.

The refinance valuation is especially important for a cash refinance because you are borrowing more money than you currently owe. Lenders must ensure that the equity in the home is sufficient to allow you to borrow.

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