Key Takeaways
Lenders evaluate your credit score, debt-to-income ratio, home equity, and payment history during the refinance process.
You’ll need to provide income verification, bank statements, and property documentation.
The higher your credit score and equity, the better your refinancing terms are likely to be.
Different loan programs (FHA, VA, conventional) have different approval criteria.
The Molly Dean Mortgage Team helps Kansas homeowners understand and meet lender requirements for a smooth refinance.
What Lenders Look for Before Approving a Refinance
Refinancing your home loancan lead to a better interest rate, a lower monthly payment, or access to home equity—but getting approved isn’t automatic. Before issuing a new mortgage, lenders carefully evaluate your financial profile to determine risk and repayment ability.
In this guide, the Molly Dean Mortgage Team explains what lenders look for before approving a refinance, how you can prepare, and what to expect from the process in today’s market.
Why Lenders Review Your Profile for a Refinance
Refinancing replaces your existing mortgage with a new one. Even though you already have a home loan, lenders view this as a new borrowing request. They want to ensure you’re financially stable enough to repay the refinanced loan under updated terms.
Approval hinges on four key factors: creditworthiness, income, home value, and debt levels.
1. Credit Score
Your credit scoreis one of the first things a lender checks. It signals how reliably you manage debt.
Typical Credit Score Minimums:
- Conventional refinance: 620 or higher
- FHA refinance: 580 minimum
- VA refinance: No official minimum, but many lenders require 600+
- Cash-out refinance: Often 640+
The better your credit, the more favorable your interest rate. A score in the 700s may qualify you for top-tier rates.
2. Loan-to-Value (LTV) Ratio
LTV compares your current mortgage balance to your home’s appraised value. Lenders prefer low LTV ratios because it shows you have equity in the property.
General LTV Guidelines:
- Rate-and-term refinance: Up to 97%
- Cash-out refinance: Typically capped at 80%
- FHA/VA streamline: May skip the appraisal entirely
A lower LTV improves your chances of approval and can help you avoid mortgage insurance.
3. Debt-to-Income (DTI) Ratio
Your DTI ratio tells lenders how much of your monthly income goes toward debt payments. It helps them gauge how comfortably you can afford the new loan.
Most Lenders Prefer:
- DTI at or below 43%
- Some programs allow higher DTI with strong compensating factors (high credit, large savings)
To improve your DTI, pay down credit cards or avoid new debts during the refinance process.
4. Income and Employment History
Lenders verify that your income is steady, sufficient, and well-documented. Expect to submit:
- Pay stubs from the last 30 days
- W-2s and tax returns from the past two years
- Bank statements
- Employment verification (especially if you’re self-employed)
If you’ve recently changed jobs, lenders may ask for extra documentation to confirm employment stability.
5. Mortgage Payment History
Lenders want to see that you’ve consistently paid your mortgage on time.
Most refinance programs require:
- No late payments in the past 6–12 months
- A strong overall payment record
If you’ve had forbearance or missed payments, some loan types may require a waiting period or extra documentation.
6. Property Appraisal
Most refinances require a professional appraisal to determine the current value of your home. This directly impacts your LTV and loan eligibility.
Some exceptions:
- Streamline refinances(FHA or VA) may not require an appraisal
- Automated valuation models (AVMs)are sometimes used for conventional loans with strong profiles
If your appraisal comes in lower than expected, it could limit your loan amount or require additional equity.
7. Type of Refinance
The kind of refinance you apply for affects what lenders need to approve your loan.
- Rate-and-term refinance: Usually the most straightforward
- Cash-out refinance: Requires more equity, higher credit, and stricter underwriting
- FHA/VA streamline: Easier requirements, no appraisal or income check
- Conventional-to-conventional: Common for rate improvements or PMI removal
We’ll help you choose the right refinance strategy based on your current loan and financial goals.
8. Assets and Reserves
Lenders may check your cash reserves—how much money you’ll have left after closing. This reassures them that you can continue making payments in case of unexpected expenses.
Reserves aren’t always required but can be helpful, especially with higher DTI ratios or larger loan amounts.
9. Loan Purpose and Benefit
Most lenders—and regulators—require that refinancing offers a clear benefit to the borrower.
Acceptable benefits include:
- Lower monthly payments
- Reduced loan term
- More stable loan structure (fixedvs. ARM)
- Removing mortgage insurance
- Access to equity for home improvements
Your loan officer will help document the benefit when you apply.
Let the Molly Dean Mortgage Team Help You Get Approved
Refinancing doesn’t have to be complicated—especially when you know what lenders look for. From credit to equity, documentation to timing, we’ll walk you through every requirementand position your application for approval.
Ready to get started?
Use our Refinance Calculatoror connect with the Molly Dean Mortgage Team todayfor a personalized refinance analysis.
Molly Dean
Molly Dean is consistently ranked as one of the top loan officers in the nation! Her knowledge of products and programs allows her the ability to help her borrowers find the program that best fits their individual needs.
Molly understands that when shopping for a mortgage professional, you need an individual and a team you can rely on. Molly’s goal is to help you in a fast and friendly manner.
Molly Dean and her team have a combined experience of 50+ years. Molly and her team work endlessly to make the purchase of a home as smooth as possible from start to finish. Molly and her team specialize in Conventional, FHA, VA, USDA, 203K, and Reverse loans.
