Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

07/28/2009
What does my credit score have to be to refinance a house in 2009?
What does my credit score have to be to refinance a house in 2009? I was hoping maybe you could give me a few hints as to what I should be looking for and what to avoid. A little advice would go a long way right now.
Michael A. Masiello:
expert info »
Higher score equals better terms and rates. You may want to get prequalified so you have an idea of available money and terms, etc. What you didn't say was why or purpose of the home equity/refinance. Lower rates,monthly cash flow, improvements are good reasons. Caution, caution. If doing this to consolidate/eliminate credit card or other debt,the key is to cut up and stop using the credit cards immediately. The only time this makes sense is if you agree to cut up and stop using the credit cards. If not, a few years down the road you'll be back in the same situation, only with more debt and no home equity. Good luck.
Gail V. Marquet:
expert info »
You can ask your lender to manually review your payment history to
refinance. Then any refinance would not depend on your credit score.
Bettye J. Banks:
expert info »
Credit score requirements vary from lender to lender and from program to program. With credit having tightened the way it has, the higher your score, the better the opportunity for you to obtain an affordable loan.

Anything under 650 is really bad. You really need to be closer to 700.

Make sure you do the following:

* Pay all your current bills on time.
* Review your credit report for accuracy, and clean up any errors.
* Keep your debt [to income] ratio at under 50% (The lower the better. Between 30-50% should work)
* Make sure your mortgage payments are on time
* Keep a stable job (at least one-two year(s) before the time you begin to look to refinance)
* If you have an FHA loan, you may qualify for a refinance without a credit check if you have paid the last 12 months on time every month.
Shauna L. Roberts:
expert info »
Every program has a different credit score requirement. If a lender is selling to Fannie Mae, the minimum credit score is 580, but you are going to need to have either a lot of assets or a low loan-to-value [LTV] [ratio] to compensate for the low credit score. If you need Private Mortgage Insurance (PMI) (if the loan amount exceeds 80% of the appraised value) then each PMI company has their own guidelines. Most PMI companies are looking for a 660 minimum credit score, and the higher the loan-to-value [LTV] [ratio], the higher the minimum credit score that is going to be required.
Editor's Note:
The loan-to-value ratio is the relationship between the loan amount and the value of the property (the lower of appraised value or sales price), expressed as a percentage of the property’s value. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent, according to The Real Estate Marketplace Glossary: How to Talk the Talk by the Federal Trade Commission at www.ftc.gov/bc/edu/pubs/consumer/homes/zrea03.pdf.]