What Is the Credit Score Needed to Refinance a House Loan?

Table Of Content

• Today’s mortgage rates for April 15, 2024: Rates slightly rise
• Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.
• Keep your credit utilization low
• Cities where Credit Karma mortgage-holders have the highest average credit scores
• Does my credit score affect the interest rate I can get when refinancing my house?
• Mortgage Calculator

Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date. The higher your credit score, the more likely you are to both qualify for a mortgage and for one at a lower interest rate. To do this efficiently, it’s best to create an account with all three credit bureaus and initiate the dispute process online. Once logged into your account, you should see the option to dispute items on your report.

Today’s mortgage rates for April 15, 2024: Rates slightly rise

Your credit score is just one element that goes into a lender’s approval of your mortgage. Here are some other personal factors that lenders consider when qualifying you for a mortgage. It can vary, but repairing a bad credit score typically takes anywhere from 3 to 6 years, sometimes less with some diligence and consistent effort. Keep a close eye on your credit score to track your financial progress and identify any potential issues early on. Regular monitoring can alert you to any unexpected changes that may indicate fraudulent activity or errors on your report. You can choose from a number of free and paid services to help you monitor your credit information.

Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

Current Mortgage Rates: Week of April 22 to 26, 2024 - Money

Current Mortgage Rates: Week of April 22 to 26, 2024.

Posted: Thu, 25 Apr 2024 16:41:15 GMT [source]

In this case, it may be a good idea to wait until you can build a more positive credit history before applying for a large loan. Let's say you're hoping to get a 30-year fixed-rate mortgage loan for the average mortgage balance of $236,443. Department of Agriculture, USDA loans don't have a minimum credit score set by the federal agency, but lenders typically require a score of at least 580. These loans are meant for low- and moderate-income homebuyers looking to purchase a home in rural areas.

Keep your credit utilization low

But the credit score needed to buy a house depends on your lender, where you want to live, and how much you need to borrow. This city is home to the world-renowned Rodeo Drive shopping district and headquarters for Live Nation Entertainment and Metro-Goldwyn-Mayer (MGM) Studios. While this neighborhood has the eighth-highest credit score in Los Angeles, its total average debt ranks third. Fairway Mortgage has a positive reputation among consumers, ranking number one for borrower satisfaction by J.D. Plus, the lender offers a few additional loan products that Zillow doesn’t, including USDA loans and reverse mortgages.

But in general, a lower score means you might find it harder to get approved for a mortgage, and you likely won't have access to the best rates. A 650 credit score makes you eligible for most types of home loans, including conventional, FHA, VA and USDA loans. Still, this score falls within the top of the fair credit score range, which means you’ll likely qualify for higher interest rates, resulting in a pricier monthly payment. For example, you can improve your credit score, reduce your debt-to-income ratio, and make a larger down payment to lower your loan-to-value ratio. An FHA loan can cater to borrowers with poor credit, but that doesn’t mean the other loan types are out of reach. Neither VA loans nor USDA loans have official minimum credit scores.

You will also change the rate and terms of your existing mortgage. Most mortgage lenders have the same credit score requirement for both types of refinances. Refinancing a house loan can reduce monthly payments, provide more equity or get you out of debt sooner. However, you will need a good credit score to refinance a house loan.

The lower [your] credit [score], the higher the interest rate and fees,” says Cenaca Cyprian, CEO of Quality Lending Group. That's an interest variance of nearly 1.6 percentage points and a $327 difference in monthly payment from the 620 to 639 credit score range to the 760+ range. These large home loans exceed conforming limits set by Freddie Mac and Fannie Mae. Borrowers usually need a down payment of 10% or more and a credit score of at least 680 – for a loan of $1.5 million or less, the minimum median credit score is 720. These loans are available to veterans of the U.S. armed forces, spouses, and active military personnel.

Lenders typically seek a FICO score of 700–720, though some may consider scores as low as 680. These loans often necessitate a 10–20% down payment, incorporating home equity as a key part of the borrowing strategy. For an FHA loan, you may qualify with a credit score as low as 500 if you can provide a 10% down payment.

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An experienced mortgage loan officer is just a phone call or email away, with answers for just about any home-buying question. If you have additional questions about the best credit score to buy a house, we have answers. While every lender is different, knowing your score and how it may impact your loan application is key. Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That’s why we provide features like your Approval Odds and savings estimates.

Ask about non-QM mortgagesNon-qualified mortgages, more commonly as non-QM loans, don’t have to meet the stringent federal standards tied to common loan programs. Some non-QM loans even allow you to get a loan one day after completing a bankruptcy or foreclosure, as long as you have a large down payment and can afford a higher interest rate. There are some steps that may help improve your odds of buying a house with low credit scores. You can get approved with more total debtLenders measure your DTI ratio by dividing your total debt by your gross income. Although most lending programs cap your DTI at 45%, a high credit score may allow exceptions up to 50%. Having a preapproval letter can also give you a leg up when putting in an offer on a home.

However, in some cases, a lender may take an average of the two borrowers’ credit scores to make it easier to qualify. If your score isn’t lender-worthy just yet, don’t worry — it can get there with some effort. You basically need the same credit score you need to get a house (at least 580 to 620) to buy a condo.

Her career includes working as a staff writer for The Atlanta Journal-Constitution, Fortune, Better Homes & Gardens, Real Simple, Parents, and Health. She was also a longtime contributor for TheStreet and her work regularly appears on Bankrate. When she's not busy writing about money topics, Mia can be found globetrotting with her son. Yes, it’s possible to buy a house with a low credit score if you have sufficient income. If you’re approved, the lender will have you sign the closing papers and submit payment to cover closing costs (usually 3% to 6% of your loan amount). Once all of the paperwork is signed, you’ll get the keys to your new home.

In addition to your current credit score, lenders scrutinize your credit history when considering your credit score to buy a house. This includes the length of your credit history, payment history, and types of credit used. A longer and more diverse credit history typically signifies to lenders that you are a responsible borrower. It represents the percentage of your monthly income that goes towards paying debts. Lenders use this ratio, in conjunction with the credit score to buy a house, to assess your ability to manage monthly payments and repay debts. A lower DTI ratio is preferable, as it indicates a good balance between debt and income, enhancing your chances of securing a favorable mortgage.