Can I Refinance My Mortgage With a 630 Credit Score?

Refinancing a mortgage is a common way for homeowners to secure a lower interest rate or reduce monthly payments. However, lenders have credit score requirements borrowers must meet to qualify. So an important question for many is can I refinance my mortgage with a 630 credit score?

The short answer is yes, it is possible to refinance with a credit score of 630. But there are some caveats to be aware of.

Overview of Credit Score Requirements

In most cases, lenders require a minimum credit score between 620-640 for a conventional mortgage refinance. Some government-backed loans like FHA and VA have lower minimum scores, usually around 580.

Here’s a quick rundown of typical credit score requirements by loan type:

• Conventional loans: 620 minimum credit score, but may require higher for borrowers with high debt-to-income ratios.

• FHA loans: Minimum of 580 credit score.

• VA loans: No minimum score, but lenders usually want to see at least 620.

• USDA loans No official minimum, but 640 is commonly required

• Cash-out refinances: Require a minimum score around 640 to 700.

So while 630 falls short of what most lenders want for a conventional refinance, it meets the minimum for an FHA refinance

Refinancing with a Credit Score of 630

A credit score of 630 sits right on the edge of what many conventional lenders find acceptable for refinancing. Some may approve a refi at 630, but the interest rate likely won’t be very competitive.

Borrowers with a 630 credit score have a couple options:

• Improve your credit score. Aim to increase your score to at least 640 or ideally around 700 before applying. This can help you qualify for better rates.

• Explore FHA refinancing. FHA loans only require a 580 credit score, so they can be a good option if your score is below 640. You’ll have to pay mortgage insurance though.

• Ask lenders about exceptions. Some lenders may make exceptions for credit scores below their normal cutoff. But this usually requires strong assets, income, and equity.

• Try alternative lenders. Online lenders and credit unions may offer refinancing to borrowers with credit scores as low as 620 or even lower in some cases.

• Wait and build your credit. Taking some time to improve your credit score can hugely expand your refinancing opportunities later.

Tips for Refinancing with Lower Credit

Here are some tips for refinancing when you have less-than-stellar credit:

• Shop around extensively. Compare mortgage rates and terms from as many lenders as possible. Cast a wide net to find the best deals.

• Ask about credit score exceptions. Don’t assume you’ll be automatically denied. Some lenders are more flexible if you have strong income, assets, and equity.

• Look at government loans. FHA, VA, and USDA loans can offer easier approval and more competitive rates for borrowers with lower credit scores.

• Consider a co-signer. Adding a co-signer with better credit can help you meet credit score requirements and potentially improve your interest rate.

• Leverage your equity. The more home equity you have, the better. It shows lenders you have “skin in the game” and lowers their risk.

• Highlight other strengths. Emphasize your positive payment history, assets, job stability, and debt-to-income ratio when applying.

Impact of Credit Score on Refinancing

In general, the higher your credit score, the better mortgage rate you can qualify for when refinancing. According to FICO, people with “very good” credit in the 740-799 range receive average interest rates that are 0.77% lower than borrowers with “good” credit between 670-739. That can make a notable difference in your monthly payments over the life of a mortgage.

Aside from interest rates, your credit score also influences other factors like:

• Loan eligibility and approval rates
• Loan terms and conditions
• Required down payment amount
• Chances of needing private mortgage insurance (PMI)

Lenders view borrowers with lower credit scores as riskier. As a result, you may face stricter loan requirements or extra fees. A higher credit score signals to lenders that you responsibly manage debt and make payments on time. That equals a lower-risk borrower in their eyes.

How to Improve Your Credit Score Before Refinancing

Here are some tips for boosting your credit score to maximize refinancing opportunities:

• Review your credit reports and dispute any errors you find. Mistakes can drag down your score.
• Pay all bills on time to build a strong payment history, which makes up 35% of your FICO score.
• Pay down credit card and revolving debt balances. Owing less relative to your credit limits helps your utilization ratio.
• Avoid opening new credit accounts right before applying to refinance. Too many hard inquiries can ding your score temporarily.
• Ask lenders for a copy of the credit report they pull so you can review the data they base decisions on.

With time and diligent credit management, it’s very possible to increase your score from the low 600s to 700 and above. Doing so can save you thousands over the life of your mortgage by qualifying you for lower interest rates.

The Bottom Line

A credit score of 630 makes refinancing more challenging but not necessarily impossible. While you may face higher rates or more restrictive loan terms, an FHA refinance remains a viable option at that score. Weigh the costs and benefits and explore ways to improve your credit profile for better refinancing opportunities down the road. With a little time and effort, you can position yourself to secure the very best mortgage rate.