Most lenders require a minimum creditworthiness assessment in Region 620 to approve a refinancing application. Federal Housing Administration programs usually have a lower minimum, although their lenders may insist on higher credit assessment requirements for some borrowers. What is a good credit score for refinancing a mortgage?
FHA refinancing
Typically, refinancing programs that meet the least sensitive FICO requirements are insured by the Federal Housing Administration. For example, the improved FHA refinancing program – the accelerated program for existing, healthy FHA home loans – there is no requirement for a minimum assessment of your creditworthiness. Theoretically, you can qualify for improved refinancing with any result. If you are replacing a non-FHA mortgage with an FHA loan, you usually need a minimum credit score of 580.
VA refinancing loans
VA loans are guaranteed by the United States Department of Veterans Affairs for military service members, veterans, and some surviving spouses. The VA does not mandate specific creditworthiness to buy or refinance loans, but lenders may have their own requirements, which can be as high as 660.
USDA improved refinancing assistance loans
USDA mortgages are for rural home buyers and are supported by the US Department of Agriculture. You must have a USDA mortgage to take advantage of the simplified refinancing loan. In most cases, the program does not require a new loan assessment, calculation of income-related debt, or home assessment. However, you must keep your mortgage for 12 months before submitting your application.
Refinancing withdrawals does not help
Refinancing withdrawals can have two negative effects on your creditworthiness. One of them is to replace the old debt with a new loan. Another is that assuming a larger loan balance can increase the loan utilization rate. The loan utilization ratio is 30% of the FICO credit score. Generally speaking, the larger the credit file and the smaller the impact on your overall debt level, the lower the potential impact of refinancing your mortgage.
Refinancing refused due to bad credit?
If you can’t refinance now, focus on rebuilding your loan. Here’s a clear point: you can quickly raise a low score. Small activities, such as paying bills on time and using a smaller percentage of the credit card limit, can have a big impact.
