Refinance requirements: Essential checklist for approval in 2025

Looking to improve your mortgage terms in today's shifting market? Refinance requirements stand as the gatekeeper between you and better loan terms. Whether you want a lower interest rate, smaller monthly payments, or access to your home equity, knowing what lenders require is your first step toward mortgage success.

Your ability to refinance depends on several key factors lenders evaluate. Most focus on your credit score, how much equity you have in your home, and your current monthly debt compared to your income. Meeting these benchmarks determines not just if you qualify, but also what interest rates and terms you'll receive.

Refinance requirements change based on your goals. A rate-and-term refinance (where you're simply changing your interest rate or loan duration) typically has more lenient qualifications than a cash-out refinance (where you borrow against your home's equity). Your current loan type also matters—conventional, FHA, and VA loans each come with their own refinancing pathways and criteria.

This guide breaks down exactly what you need to qualify for a mortgage refinance, helping you understand if refinancing makes sense for your situation and how to position yourself for approval. We'll cover the specific documentation, credit requirements, and financial standards most lenders expect before giving your application the green light.

....in as little as 3 minutes – no credit impact

Why you should consider a refinance

Refinancing your mortgage replaces your current loan with a new one that often comes with better terms. The right refinance can cut your costs, give you access to equity, or change your loan structure to better fit your needs. Let's look at the major benefits that might make refinancing worth your while.

Lower your interest rate

Even a small rate reduction can mean big savings over time. Dropping from a 5% to a 4% interest rate on a $300,000 mortgage saves you over $30,000 across a 30-year term. This directly cuts your monthly payment, freeing up cash for other financial goals.

Adjust your loan term

Shortening your loan term (like moving from a 30-year to a 15-year mortgage) can significantly reduce the total interest you'll pay, though your monthly payments might increase. Conversely, extending your term lowers your monthly payments, creating more breathing room in your budget during tight financial periods.

Tap into home equity

A cash-out refinance lets you borrow against your home's equity for:

✅ Home improvements or renovations
✅ Debt consolidation at lower interest rates 
✅ Education expenses
✅ Major life expenses

This approach typically offers better rates than personal loans or credit cards, making it a smart way to fund large expenses.

You can also borrow against your home's equity without refinancing, using a HELOC.

Switch loan types

Moving from an adjustable-rate mortgage to a fixed-rate loan eliminates the uncertainty of payment changes. While ARMs might start with lower rates, a fixed-rate mortgage gives you consistent payments for the entire loan term.

Eliminate PMI

If you've reached 20% equity in your home, refinancing can remove private mortgage insurance requirements, saving hundreds of dollars annually.

What to do before refinancing: credit, timing, and cost

Improve your credit score first

One of the easiest ways to improve a credit score over a short period of time is to lower your credit utilization. A modest improvement from fair credit (580-669) to good credit (670-739) could qualify you for much better interest rates.

To boost your score quickly, keep credit card balances below 30% of your limits. With a $1,000 limit, for example, stay under $300 to help your credit rating.

Timing and costs

Most refinances take 30-45 days to complete according to the refinance process timeline. Planning ahead helps you lock in good rates when market conditions favor borrowers.

Be aware of closing costs, which typically run 2-5% of your loan amount. Some lenders like Better offer no-closing-cost refinance options, which allow you to refinance your home with no out-of-pocket costs.

Different loans have different credit requirements:

— Conventional refinances: Usually 620 minimum
— FHA loans: May accept scores as low as 580

Check your credit score requirements for refinancing to avoid surprises when you apply.

Shopping for the best deal

Each lender has different refinance requirements and rates, so comparing multiple offers often leads to better terms. To maximize your chances of approval, review these five tips to prepare for a refinance.

Our refinance calculator can help you determine potential savings based on current refinance rates. If you have a second mortgage or HELOC, understanding your loan subordination options becomes important when refinancing.

The right refinance aligns with your specific financial situation and goals. By evaluating your options and ensuring you meet the criteria, you can make a smart decision that improves your financial position for years to come.

With Better, you can see what you're pre-approved for in as little as 3 minutes, with no impact to your credit score.

What do I need to refinance my home?

Qualifying for a mortgage refinance means meeting specific lender criteria for three key factors: your credit score, loan-to-value ratio, and debt-to-income ratio. Let's break down what lenders actually look for when reviewing your application.

Credit score

Your credit score directly impacts both your refinance eligibility and the interest rate you'll receive. For most conventional refinances, you'll need a minimum score of 620, while FHA loans may accept scores as low as 580. Cash-out refinances typically require higher scores—often 640-680—because they represent greater risk to lenders.

If your score falls short, consider improving it before applying. 

Quick ways to boost your score:

— Keep credit card balances below 30% of available limits
— Review your credit report for errors
— Avoid applying for new credit
— Pay all bills on time

Most lenders also check your payment history. Late mortgage payments in the past 6-12 months will likely disqualify you, especially for cash-out refinances.

Loan-to-value (LTV) ratio

Your LTV ratio shows what percentage of your home's value you're financing. Calculate it by dividing your loan amount by your home's appraised value.

For example: $200,000 (loan amount) ÷ $300,000 (home value) = 67% LTV

This means you have 33% equity in your home. Most conventional refinances require at least 20% equity (80% LTV or lower). FHA loans might allow up to 97.75% LTV, but you'll pay mortgage insurance. For cash-out refinances, stricter limits apply—typically 80% for conventional loans, while VA loans might go up to 90-100% LTV.

With less than 20% equity, you may still qualify but expect higher rates or continued mortgage insurance. Some government programs like FHA Streamline Refinance or VA IRRRL might waive the appraisal requirement altogether.

Debt-to-income ratio

Your debt-to-income (DTI) ratio measures monthly debt payments against your gross monthly income. Lenders use this to determine if you can comfortably afford your mortgage.

Most conventional loans require DTI below 43%, though some lenders may go up to 50% with compensating factors like excellent credit. Cash-out refinances often need lower DTIs—sometimes below 40%—since taking equity increases risk.

Calculate your DTI:

— Add up all monthly debt payments (mortgage, car loans, student loans, credit cards, etc.)
— Divide by your gross monthly income
— Multiply by 100 for your percentage

The Consumer Financial Protection Bureau requires lenders to verify you can afford the loan. You'll need documentation like pay stubs, W-2s, tax returns, and bank statements. Self-employed borrowers face extra scrutiny, typically needing two years of tax returns or profit-and-loss statements.

Remember that streamline refinance options may reduce documentation requirements, while no-closing-cost refinances might affect your rate. Understanding loan subordination matters if you have a second mortgage.

Each lender has slightly different guidelines, so comparing offers can help you find the best terms for your situation. Use a refinance calculator to check your eligibility based on your credit score requirements and estimate potential savings.

Cash-out refinance requirements: tapping your home's value

Want to access your home's equity through refinancing? Cash-out refinances let you borrow against your property's value, but come with stricter requirements than standard refinances. Lenders consider these loans riskier since you're increasing your loan amount and taking money out of your equity, which means they'll examine your finances more carefully.

Why cash-out refinances face tougher standards

Cash-out refinances increase your monthly payments, which explains why lenders scrutinize your mortgage payment history and credit habits so closely. For most cash-out options, your name must appear on the property title for at least 6 months with jumbo or VA loans, while conventional and FHA cash-out refinances typically require a full year of ownership. Some exceptions exist for inherited homes or delayed financing situations.

Cash-out refinance requirements by loan type

Loan Type	Minimum Credit Score	Maximum LTV	DTI Ratio	Cash Reserves	Appraisal	Income Verification
Conventional	620	80%	36%-43%	For closing costs	Yes	Yes
FHA	580	80%	Varies	For closing costs	Yes	Yes
VA	Usually 620	90%	41%-43%	For closing costs	Yes	Yes

Note: These figures serve as guidelines. Your exact requirements may vary based on your lender, refinance type, and financial situation. For example, with Better's FHA and VA streamline refinances do not require income verification or appraisals.

Key qualification factors for cash-out refinances

✅ Credit score requirements

Cash-out refinances demand higher scores than standard refinances—typically 640-680 minimum versus the 620 baseline for conventional loans. Your current loan must show no late payments in the past 6-12 months.

✅ Loan-to-value ratio limits

Most lenders cap cash-out refinances at 80% of your home's value, ensuring you maintain at least 20% equity. VA loans offer more flexibility for qualified veterans, sometimes allowing up to 90% LTV.

✅ Debt-to-income ratio standards

Your DTI faces stricter limits with cash-out refinances. Lenders generally prefer a DTI below 40% for cash-out options, compared to the 43% threshold for standard refinances.

✅ Cash reserves and closing costs

You'll need sufficient funds for closing costs (typically 2-5% of the loan amount). Some lenders require additional cash reserves—especially for jumbo loans, where reserves covering one year of expenses might be mandated.

The appraisal process

The appraisal becomes particularly important for cash-out refinances since the lender must determine exactly how much equity you have available for borrowing. Unlike some streamline refinance options, appraisal waivers are rarely granted for cash-out transactions. That said, lenders like Better sometimes use AVMs (or automated valuation models) to skip the wait and cost of traditional appraisals.

Income verification standards

Lenders will require documentation such as:

— Recent pay stubs
— W-2s
— Tax returns
— Proof of additional income sources

Self-employed borrowers face additional requirements, including profit-and-loss statements and two years of business tax returns.

Before you apply

Check your credit score requirements and use a refinance calculator to understand potential savings. If your existing mortgage includes a second lien, research loan subordination options.

Your current financial situation and current refinance rates will ultimately determine whether a cash-out refinance makes sense for your needs. For many homeowners, the ability to access equity at lower rates than credit cards or personal loans makes cash-out refinancing an attractive option despite the stricter requirements.

....in as little as 3 minutes – no credit impact

Refinance requirements: common questions

Homeowners often ask specific questions about refinance requirements. Here are answers to the most frequent refinancing questions.

What income requirements are needed for a refinance?

Your debt-to-income (DTI) ratio stands as the main factor lenders use to assess your income. Most loans require a DTI between 36% and 50%, meaning your monthly debt payments shouldn't exceed half your gross monthly income. The Consumer Financial Protection Bureau requires lenders to verify you can comfortably afford the new loan.

For income verification, you'll typically need:

— Recent pay stubs showing year-to-date earnings
— W-2s from the past two years
— Federal tax returns (often from the past two years)

Self-employed? Expect additional scrutiny. You'll likely need two years of tax returns or profit-and-loss statements plus balance sheets. Similarly, if you have rental income, alimony, or child support, you must provide documentation proving these income sources.

Do I need title insurance to refinance?

Yes, most lenders require title insurance when refinancing. While you purchased title insurance with your original mortgage, that policy protected only the original loan. A new refinance loan needs new title insurance to guard against any liens or claims that might have appeared since.

The good news? You may qualify for a "reissue rate," offering a discount on your new policy. If title insurance costs concern you, look into no-closing-cost refinance options, though these typically come with slightly higher interest rates.

Do I have to refinance with the same lender?

Not at all. You're free to shop around for refinance rates from any lender, regardless of who holds your current mortgage. Comparing offers often leads to better terms and significant savings.

Your current lender might offer perks like streamlined processing or waived fees to keep your business. However, another lender might provide better interest rates or terms that save you more money long-term.

If you have a second mortgage, understand loan subordination requirements before switching lenders, as this affects how your loans are prioritized.

....in as little as 3 minutes – no credit impact

Final thoughts on refinancing requirements

Refinancing your mortgage puts better loan terms within reach when you understand what lenders need from you. Throughout this guide, we've outlined the key factors that determine your eligibility and the terms you'll receive.

Your credit score serves as the foundation of your application—with conventional loans typically requiring at least 620, while FHA loans may accept scores as low as 580. Your loan-to-value ratio dictates how much equity you need, usually 20% for conventional refinances without PMI. Your debt-to-income ratio should generally stay below 43% to show lenders you can handle your monthly payments comfortably.

Cash-out refinances offer valuable access to your home equity but come with higher hurdles due to the increased risk to lenders. These include stronger credit score requirements, stricter LTV limits, and more thorough income verification.

Before you jump into refinancing, weigh the potential savings against the costs. Keep timing in mind—most refinances take 30-45 days to complete according to the refinance process timeline. Options like no-closing-cost refinances can reduce your upfront expenses, though typically at the cost of a slightly higher interest rate.

Knowing where you stand financially is crucial to making the right decision. Checking your credit score requirements for refinancing and using a refinance calculator helps determine if refinancing makes sense for your situation.

Breaking down the refinance process into clear steps makes it much more manageable. Get pre-approved for a refinance in as little as 3 minutes - no credit impact - to see your specific options based on your unique financial profile.

Preparation remains your best tool for refinancing success. Follow these five tips to prepare for a refinance to boost your approval chances. While requirements vary between lenders, understanding these core criteria puts you in position to make smart decisions that could save thousands over your loan's lifetime.

....in as little as 3 minutes – no credit impact