Refinance requirements: what lenders look for

On a conventional refinance, equity is the ceiling that binds. Fannie Mae's Eligibility Matrix, dated 5 August 2026 and read on 21 September 2026, caps a cash-out refinance of a one-unit home you live in at 80 percent of what the property is worth, and a rate-and-term refinance of the same house at 95 percent. Those are the outer edge of what a lender may sell, not a decision about your file.

BEDRWay is not a lender or a mortgage broker. We are not licensed to originate mortgages in any state, we set no rates and quote none, and nothing on this page is an offer of credit or a prediction about a credit decision. Every threshold below is somebody else's published guideline. We introduce you to one licensed loan officer who lends where you live, and only that person can tell you what your own file does.

Reviewed by the BEDRWay editorial team. Last reviewed 21 September 2026. Dated figures name their source and the day it was read.

Equity: the ceiling that actually binds

Loan-to-value is the new loan divided by what the property is worth. It is the first thing to work out, because it is the requirement that most often stops a file, and because every other threshold on this page is easier to meet than this one.

Fannie Mae splits a refinance in two, and the names it uses are not the names anyone else uses. A limited cash-out refinance is what the rest of the market calls rate-and-term: it pays off the existing first lien and the costs of doing so, and hands the borrower back no more than the greater of 1 percent of the new loan amount or $2,000 (Fannie Mae B2-1.3-02, effective 8 October 2025, read 21 September 2026). A cash-out refinance is deliberately larger than the debt it retires. The second is capped considerably lower than the first, and that gap is the single most consequential number in this subject.

The ceilings below are Fannie Mae's, for loans underwritten through Desktop Underwriter, which is how most conventional files are run. Source and date, together: the Eligibility Matrix, the version dated 5 August 2026, read on 21 September 2026. Freddie Mac publishes its own and the two do not always agree at the edges, so where a lender tells you something different, the honest answer is often that it is selling to one of them and you are reading the other.

Four things the table does not say, and each of them moves a real file.

• The 97 percent row is conditional. Above 95 percent the loan has to be fixed-rate, on a one-unit principal residence every borrower occupies, run through Desktop Underwriter, not high-balance, and Fannie Mae must already own the mortgage being replaced. That last condition is the one that decides it, and you can look it up rather than guess.
• A manually underwritten loan sits lower. On a principal residence the manual ceilings are 95 percent for one unit, 85 percent for two and 75 percent for three or four, and each comes with a credit score and a reserve requirement attached.
• Mortgage insurance attaches above 80 percent on a conventional loan. It is a cost that appears nowhere in the ceiling and changes the arithmetic of the whole exercise.
• Combined loan-to-value is the figure that binds where a second lien exists, and a HELOC counts whether or not it is being paid off. A holder who will not subordinate can stop the file on its own.

Work out where you stand before anything else: the loan-to-value ratio and how much equity you hold take a value and a balance and return the ratio. If the reason for the exercise is turning that equity into money rather than changing the terms of the debt, the cash-out refinance guide is the page for it.

Credit: the 620 everyone repeats is the wrong number more often than not

Fannie Mae's own rule, from B3-5.1-01, effective 22 April 2026 and read on 21 September 2026: a minimum credit score is not required at all for a loan casefile underwritten through Desktop Underwriter. The system weighs the score against everything else in the file instead of applying a floor to it. The 620 is the floor for manually underwritten fixed-rate loans, and 640 for adjustable ones, which is a much smaller share of what actually gets written.

On a cash-out specifically, manual underwriting is stricter than 620 rather than equal to it. The Eligibility Matrix puts a one-unit principal residence cash-out at 680 above 75 percent loan-to-value and 660 at or below it, dropping to 660 and 640 respectively where six months of reserves are held, and rising to 700 and 680 once total debt-to-income passes 36 percent. The lowest manually underwritten cash-out score on that table is 640, and it needs the low ratio, the low debt load and the reserves all at once.

Two practical notes. The score a lender uses is rarely the one on a consumer app: lenders pull all three bureaus and work from the middle score, and where there are two borrowers, from the lower of the two middle scores. And a lender's own floor is an overlay rather than a guideline, which is why it is the number that will actually be quoted at you and why it is worth asking for directly.

The exception is the streamline programs. In their non-credit-qualifying forms an FHA Streamline and a VA IRRRL look at the payment record on the loan being replaced rather than at a score at all, which is what makes them the route for a borrower whose credit has moved the wrong way since the original loan.

Debt-to-income

Two ratios, both measured against gross monthly income: the housing obligation on its own, and every recurring debt obligation together. The second is the one that usually binds. Fannie Mae's ceilings, from B3-6-02, effective 2 April 2025 and read on 21 September 2026: through Desktop Underwriter the maximum allowable total ratio is 50 percent. Manually underwritten, the maximum is 36 percent, which may be exceeded up to 45 percent where the borrower meets the credit score and reserve requirements in the Eligibility Matrix. On a cash-out the same topic says the maximum may be lower still in Desktop Underwriter, and six months of reserves are required once the ratio passes 45 percent.

What counts is narrower than most people expect. A minimum payment on a card counts whether or not you pay the balance in full; a car loan with a handful of payments left may not; utilities, groceries and insurance premiums do not count at all. An installment debt paid off to clear the ratio has to be paid off and documented, not merely promised. The debt-to-income calculator shows both ratios from figures you enter.

Seasoning: how long you have to wait

Every program puts a clock on how soon a loan may be replaced, and the clocks are different from each other in ways competing pages routinely flatten into one number. This is the section most worth reading twice.

• Conventional rate-and-term. No statutory waiting period. Lenders apply their own.
• Conventional cash-out. Two clocks, and they run separately. The first mortgage being paid off must be at least twelve months old, measured note date to note date. And at least one borrower must have been on title for at least six months before the new loan disburses, unless the property was inherited or legally awarded in a divorce, separation or dissolution, or the delayed financing rules are met (Fannie Mae B2-1.3-03, effective 10 December 2025, read 21 September 2026).
• FHA Streamline. Six payments made on the loan being replaced, six months since its first payment due date, and at least 210 days since it closed (HUD Handbook 4000.1, II.A.8).
• VA IRRRL. The later of six consecutive monthly payments and 210 days after the first payment due date of the loan being replaced (38 U.S.C. § 3709(c)).
• USDA streamlined-assist. Twelve consecutive on-time payments.

Alongside the clock, FHA and VA both impose a benefit test. FHA calls it a net tangible benefit: the new loan has to be measurably better by a standard FHA defines, and the test exists to stop a loan being refinanced repeatedly for somebody else's benefit rather than the borrower's.

Income, employment and reserves

A refinance is underwritten on the same income evidence as a purchase, minus everything to do with buying a house. Two years of history is the shape of it: two years in the same line of work, two years of returns where returns are required, and an explanation for any gap in between. Self-employment is not harder, it is just documented differently, and the documentation takes longer to assemble than anyone expects.

Reserves are the quiet one. They are months of the housing obligation held in accounts you can reach after closing, they are required more often as loan-to-value and unit count rise, and they are the requirement most likely to appear for the first time as an underwriting condition in week four. The full list of what to have ready is on the refinance guide, which sets it out by how you are paid.

The property, and whether it gets valued

Not every refinance is appraised. Fannie Mae now calls the skip value acceptance rather than an appraisal waiver, and its automated underwriting offers it on selected files from data the agency already holds. FHA Streamline and VA IRRRL frequently proceed without a valuation, and USDA streamlined-assist requires none. You cannot apply for it. It is offered in underwriting or it is not, and a file built on the assumption that it will be is a file with one unmanaged risk in it.

Occupancy is the other property question, and it is the one people get wrong by accident. A home you live in, a second home and a rental are three different sets of thresholds, as the table above shows, and what governs is how the property is actually used rather than what it was when you bought it. A property that has become a rental since the original loan belongs in the third column. Where it is a rental underwritten on its own income rather than yours, it is a different product altogether: see a DSCR loan for an investment property.

Condominiums carry a fourth layer, which is the association rather than you. Where the building's own paperwork is the dependency, the refinance moves at the association's pace. Florida has made that concrete, and the Florida page says how.

What is not a requirement

• A minimum improvement on the loan you hold. On a conventional refinance there is no such rule. FHA and VA impose one; conventional does not, which is why a refinance purely to change the term or drop mortgage insurance is a normal thing to do.
• Staying with your current lender. You may refinance with anyone, and the consumer protection at the end of the process is actually stronger when you do not, for the reason in the next section.
• A perfect file. Conditions are the normal state of an underwritten loan, not a warning sign. A conditional approval is a list, not a verdict.
• Anything we verify. BEDRWay checks nothing about your credit, income or property, and makes no representation to any lender about them.

What the law gives you whatever the lender decides

Three windows, and none of them is a courtesy. Regulation Z requires the Loan Estimate to reach you no later than the third business day after the lender receives your application (12 CFR 1026.19(e)). The final Closing Disclosure must be in your hands at least three business days before consummation (12 CFR 1026.19(f)), and certain late changes restart that clock.

Then the right of rescission, which is the one people do not know they have. On a refinance secured by the home you live in, federal law generally gives you until midnight of the third business day to cancel the transaction, and nothing may be disbursed before it expires. Saturdays count; Sundays and federal holidays do not. The clock does not start at signing, though. The CFPB sets out the three events it starts after, and it is the last of them that counts: you sign the note, you receive an accurate Truth in Lending disclosure, and you receive two copies of the notice explaining the right itself (CFPB, last reviewed 8 August 2024, read 21 September 2026).

Two exceptions, and the second is the reason to read the name on the note. It does not attach to a purchase at all. And under 12 CFR 1026.23(f)(2), read 21 September 2026, a refinance by the creditor that already holds the loan on your principal dwelling is exempt, except to the extent the new amount financed exceeds the old unpaid principal, the earned unpaid finance charge and the costs of the refinancing. So refinancing with a new lender is rescindable in full, and refinancing with your existing one is rescindable only as to the new money. Worth knowing that the CFPB's own consumer pages do not mention that exemption; the regulation is the controlling text and this page follows it.

Questions people ask

What disqualifies you from refinancing?

In order of how often it is the answer: not enough equity, which is the ceiling in the table above; a debt load that puts the total ratio over the program limit; recent late payments on the mortgage being replaced, which the streamline programs care about most because their whole premise is that payment record; a seasoning clock that has not run out yet; and a property whose occupancy or condition does not match the program. Credit score comes lower down that list than most people expect, because it is the one a borrower can usually see coming.

Worth separating from all of those: a lender declining a file is not the same as the guidelines excluding it. A decline is one company's answer, and the thresholds on this page are what the market as a whole will buy.

What is the 2 percent rule for refinancing?

A rule of thumb from an older market, not a requirement, and no lender applies it. It survives because it is easy to repeat and because it once did rough justice to the arithmetic when costs were larger relative to balances than they are now. What it was always standing in for is the break-even: what the exercise costs in cash, and how many months of the change it takes to get that back. That is a calculation on your own numbers rather than a threshold, and the break-even calculator does it. This site publishes no rate and so takes no view on the margin.

Does it have to be the same kind of loan?

No, and this is the most useful thing conventional refinancing does. It can replace an FHA or a VA loan, which is the ordinary route out of an FHA mortgage insurance premium that runs for the life of the loan. The reverse is narrower: the streamline programs each replace a loan of their own kind and nothing else.

What to ask before the file is submitted

• What loan-to-value are you using, and where did the value come from?
• Is value acceptance available on my file, or is an appraisal being ordered?
• What is your own credit floor on this program, as opposed to the agency's?
• Which debts are you counting in the ratio, and which are you leaving out?
• Is there a prepayment penalty on the note I already signed? Rare on modern owner-occupied loans, not on older ones.
• Does a second lien have to subordinate, and has the holder been asked yet?

Meeting the requirements is not the same question as doing it

A file that clears every threshold above can still be a bad idea, and this page is deliberately silent on which. There is no rate here: BEDRWay sets none and quotes none. What does not move when the market does is the shape of the decision, and two calculators do the arithmetic on numbers you supply rather than numbers we invent. Run your own break-even for the months it takes to recover what you spend, or set the loan you hold against a new one. The full walk-through of the process, the documents and the timeline is on the refinance guide.

Your assumption, not a quote. BEDRWay is not a lender and does not set or quote rates. Every figure a calculator returns is the arithmetic of what you entered.

How BEDRWay works

BEDRWay is not a lender, a mortgage broker or a servicer, and we do not underwrite, price or approve anything. You tell us your situation, and we introduce you to one licensed loan officer who lends where you live. One, not a pool of them bidding, not a call center. That loan officer pays us a flat fee for the introduction, whether or not you close a loan, which is why there is no cost to you.

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