The FHA requires a minimum credit score of 500 for all mortgages it insures. However, most private lenders will have their own credit rating requirements. According to FHA guidelines, applicants must have a minimum credit score of 580 to qualify for an FHA cash-out refinance. However, most FHA-insured lenders set their own higher limits to include a minimum score of 600 to 620, since cash out refinancing is approved more carefully than even buying a home.
Some companies require at least one credit rating for all qualifying borrowers. Others require that you use the average score if there are three applicable scores, or that you use the lowest score if there are two. The lowest credit rating would be used for rating purposes. Consult your licensed loan officer about the lending institution's credit requirements in such cases.
Typically, you'll also be able to get a lower mortgage insurance rate, as the PMI for FHA Streamlines is 0.55% of your total annual loan amount. All other things being equal, a high score should give you a lower rate, while a poor credit score means you'll pay more for your refinance loan. Regardless of whether you choose a conventional or FHA loan, there are a few other costs you should consider. FHA borrowers also pay an annual mortgage insurance premium, which is based on the term (duration) of your mortgage, your loan-to-value ratio (LTV), the total amount of your mortgage, and the amount of your down payment.
If your credit score isn't high enough to qualify for the refinancing or interest rate you need, you might consider raising your score before you apply. The exact credit score you'll need to refinance your mortgage depends on the type of loan and your lender's specific requirements. FHA loans are available with low down payment options and lower minimum credit score limits, but you'll also need to pay for mortgage insurance. When you're looking to buy or refinance a home with an FHA loan, it's important to know your credit rating.
Because of that government support, you may be eligible for lower rates than you would get with other mortgage refinance options, and you may qualify even if you have credit that isn't perfect. FHA loans are backed by the Federal Housing Administration, an agency under the jurisdiction of the Department of Housing and Urban Development. Understanding how an FHA cash-out refinance works and the costs involved will help you decide if it's the best option for accessing additional funds. Minimum credit rating requirements vary by type of loan, and some types of refinancing have no minimum rating.
If you need to take advantage of home equity but your credit scores aren't very high, it may be worth considering an FHA cash-out refinance. The option of a low down payment and more lenient credit requirements can make FHA loans particularly attractive to first-time homebuyers, although you don't need to be a first-time homebuyer to qualify. If you are interested in refinancing your mortgage, you can use an FHA cash refinance loan even if your current home loan is not an FHA mortgage.