Requirements to Refinance a Mortgage

A homeowner looking to refinance a mortgage will have to meet the requirements set by lenders. 

Refinancing your mortgage replaces your current home loan with one with new terms. Many borrowers choose to refinance their mortgage to get new rates or change the length of their loan. One reason borrowers refinance a mortgage is to reduce their monthly payments. 

These refinance requirements are set to help protect a lender and their investment.  

You can begin your mortgage refinance when you start an application. 

Basic eligibility requirements to refinance a mortgage

Here are some requirements a lender will ask for when looking to get borrowers a mortgage refinance. 

Minimum credit score requirements for mortgage refinance 

Most lenders will require a minimum credit score of at least 620. However, some lenders may approve a mortgage refinance for borrowers with a score as low as 500. 

Your credit score is one of the factors that helps determine the rate you will get during a mortgage refinance. The higher credit score you have, the better rate you could get. A credit score of 760 or above could get you the most favorable rates on your mortgage refinance. 

Income and employment verification requirements 

To ensure you are able to meet monthly payments, lenders will need to verify your income and employment. Documentation like pay stubs or tax returns are proof of income and employment verification.  

Debt-to-income (DTI) ratio requirements​ 

Your debt-to-income (DTI) ratio is a comparison between how much you make and debts you may have. Most lenders will look for borrowers to have a DTI of no more than 43%. 

Having a lower DTI means that more of your income can go toward your mortgage payments and help you qualify. 

Home equity requirements for refinancing 

Home equity refers to the difference between your home’s value and remaining mortgage balance, or the percentage of your home that you own outright. Most lenders require a borrower to have at least 20% equity in their property. 

Property appraisal requirements 

To determine a home’s equity, an updated home value estimate will be required. This will be done through a home appraisal. The cost of home appraisals will have to be covered by the borrower. 

Documents required to refinance your mortgage 

When looking to get a refinance on your mortgage, lenders will need you to provide some documentation. To prepare for your mortgage refinance, you can start by gathering these documents. 

Pay stubs and W-2 forms 

When looking to verify your employment history and see your income, lenders will ask for pay stubs and W-2 forms. 

Tax returns for self-employed borrowers 

If you are self-employed, tax returns from the previous two years could take the place of pay stubs and W-2 forms. 

Bank statements and asset documentation  

Lenders will require that potential borrowers provide bank statements and documentation of any assets you own to show you can cover any closing costs and reserve savings in case something changes in your income. 

Current mortgage statement 

Your current mortgage statement is important in determining your home equity, as well as showing lenders what monthly payments you make and the terms of your home loan. 

How to qualify for a mortgage refinance faster 

If you are looking to qualify for a mortgage refinance faster, make sure you meet all the required qualifications and gather all required documents before beginning your application. 

If you have any questions about the mortgage refinance process or what you could expect, you should talk to a Loan Officer. During an online application, you will be connected with a Loan Officer who can answer any questions you may have and help you through your mortgage refinance. 

With everything gathered and when you are ready to talk to a professional Loan Officer, start your online application. 

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.  

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