Fannie Mae and Freddie Mac underwriting standards govern most of what is below — how much you can borrow against the value, whether it is a primary residence or a rental, the debt-to-income ceiling. They do not set the credit floor; lenders do. Here are the key qualifying factors for 2026:
● Credit Score for Conventional Refinance
Lenders require 620 for a conventional mortgage refinance. The agencies do not: Fannie Mae’s automated underwriting sets no minimum credit score at all, and 620 shows up only on its manual grid. So the floor you have to clear is the lender’s. Borrowers between 620 and 679 pay higher loan-level price adjustments (LLPAs), which increase the rate. Scores of 740 or above receive the best conventional refi pricing with the fewest adjustments.
Fannie Mae publishes the full LLPA matrix publicly so borrowers can see exactly how their score affects their rate.
● Home Equity Required
Rate-and-term conventional refinances go to 95% LTV, so you need at least 5% equity. You get down to 3% only when Fannie Mae or Freddie Mac already owns your loan. Cash-out refinances are capped at 80% LTV on a primary residence — you must have at least 20% equity after the cash-out is factored in. Second homes and investment properties cap at 75% LTV for cash-out. If you have less than 20% equity, PMI will still apply on the new loan.
● Debt-to-Income Ratio
Standard maximum DTI for a conventional loan refinance is 49.99% under Fannie Mae guidelines. Getting there takes a Desktop Underwriter (DU) approval. DTI is calculated by dividing your total monthly debt payments by your gross monthly income.
● Income & Employment Verification
A two-year employment history is required. W-2 employees provide 30 days of pay stubs and two years of W-2s. Self-employed borrowers provide two years of personal and business tax returns. A year-to-date profit and loss statement may be required if the refinance closes after June 30th of a given calendar year. Rental income from the subject property or other owned properties requires two years of documented history.
● Reserves & Assets
Most conventional refinances require two months of PITI in verified reserves after closing costs. Investment property refinances typically require six months of reserves. Reserves may be held in checking, savings, 401(k), or IRA accounts — retirement accounts count at 60% of vested balance. Two months of statements are required for all asset accounts used in qualifying.
● Appraisal & Property Condition
Most conventional refinances require a full interior appraisal to establish the current market value of the property. Fannie Mae’s Desktop Underwriter may waive the appraisal on select refinances with strong equity and credit — called an appraisal waiver or Property Inspection Waiver (PIW). The property must be in good condition with no health or safety issues. Condos must meet Fannie Mae project approval requirements.
A conventional refi is not a one-size-fits-all decision. Here are the most common scenarios where refinancing makes clear financial sense — and one where it does not:
Lower Your Rate
If current conventional refinance rates are at least 0.5% below your existing rate, the monthly savings often justify closing costs within two to three years. The break-even calculation divides closing costs by monthly savings to find your payback period.
Eliminate PMI
If your home has appreciated to the point where you now have 20% equity, refinancing at a lower rate eliminates PMI at the same time — a double savings. On a $500,000 loan, removing PMI alone can save $150 to $200 per month.
Shorten Your Term
Refinancing from a 30-year to a 15-year conventional loan pays your home off faster and saves substantial interest over the life of the loan. The monthly payment goes up, but total interest paid drops dramatically — often by six figures on larger loan balances.
Cash-Out for Home Value
A conventional cash-out refinance up to 80% LTV lets you access equity to fund renovations that increase property value. Kitchen and bathroom upgrades in NJ, CT, and FL markets can return 70 to 85 cents on every dollar invested, making this a strategic use of equity.
FHA-to-Conventional Refinance
Borrowers with an existing FHA loan who now have 20% equity and a 620-plus FICO can refinance into a conventional loan and eliminate FHA mortgage insurance premium entirely — saving the ongoing monthly MIP that stays for the life of an FHA loan. See our
FHA loan page for the full comparison.
When to Wait
If your break-even period exceeds the time you plan to stay in the home, a conventional mortgage refinance may not save money. Similarly, if closing costs reset a loan near the start where you pay mostly interest, the long-term savings can be smaller than they appear.
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What credit score do I need for a conventional refinance?
Lenders require 620. The agencies do not — Fannie Mae’s automated underwriting says outright that no minimum credit score is required, and 620 appears only on its manual grid. Freddie Mac publishes none at all. It is still what most files get measured against, so plan around it. Between 620 and 679 you will pay higher loan-level price adjustments, which raise the effective rate. At 740 or above you get the best conventional refinance pricing. Below 620, an FHA streamline refinance or FHA rate-and-term refinance starting at 500 may be an option.
How much equity do I need to refinance conventionally?
For a rate-and-term conventional refinance you need at least 5% equity (95% LTV). You get down to 3% only when Fannie Mae or Freddie Mac already owns your loan. For a cash-out conventional refinance on a primary residence, you must retain at least 20% equity after the cash-out — meaning the maximum LTV is 80%. Second homes and investment properties require at least 25% equity for cash-out, capping at 75% LTV.
What is the maximum cash-out on a conventional refinance?
On a primary residence, the maximum cash-out conventional refinance allows you to borrow up to 80% of your home’s appraised value. The difference between your new loan amount and your current payoff balance (minus closing costs) is what you receive in cash at closing. There is no absolute dollar cap on cash-out amount — it is limited only by your home value, current loan balance, and the 80% LTV ceiling.
Can I refinance from an FHA loan to a conventional loan?
Yes. If you have at least 20% equity and a 620-plus FICO score, you can refinance from an FHA loan into a conventional loan. The primary benefit is eliminating FHA mortgage insurance premium (MIP), which stays on FHA loans for life if you put less than 10% down. Removing MIP through an FHA-to-conventional refinance typically saves $100 to $300 per month depending on loan balance.
How long does a conventional refinance take?
A conventional mortgage refinance typically takes 21 to 45 days from application to closing. The appraisal is usually the longest step at 7 to 14 days. Fannie Mae’s Desktop Underwriter may issue an appraisal waiver on refinances with strong equity, which can reduce the timeline by one to two weeks. The three-day rescission period after closing applies to all refinances on a primary residence.
What documents do I need for a conventional refinance?
Standard documents for a conventional refinance include two years of W-2s and tax returns, 30 days of pay stubs, two months of bank statements, a government-issued ID, your current mortgage statement, and homeowners insurance declarations page. Self-employed borrowers also provide two years of business returns and a year-to-date profit and loss statement. You will also need the property’s most recent tax bill.
Do Fannie Mae and Freddie Mac actually require a 620 credit score?
No. Fannie Mae’s automated underwriting states that no minimum credit score is required — it weighs the whole profile instead — and 620 appears only on the manual grid. Freddie Mac publishes no minimum at all. The 620 you see quoted everywhere is a lender overlay, which is why it moves from one lender to the next. It is still what most files get measured against, so plan around it. It matters most when your score is close to the line, because an overlay is a lender’s own rule and lenders do not all write it the same way.
When does PMI come off, and what drives the cost?
If the new loan lands above 80% of your home’s value, private mortgage insurance applies until you are back under it. The difference from FHA is that it ends. Conventional PMI comes off at 20% equity; FHA’s premium can stay for the life of the loan. What it costs depends on your credit score and your loan-to-value — the same pair that sets your rate, so the two move together. Ask for the PMI figure alongside the rate quote rather than after it. On a high-LTV refinance it is the number that decides whether the deal is worth doing.
Will I need a new appraisal?
Usually, yes — a full interior appraisal is the default. Fannie Mae’s Desktop Underwriter can issue an appraisal waiver when the equity and credit are strong, and that removes the longest step in the file. You do not get to request one; it either comes back with the underwriting findings or it does not. If it does not, order the appraisal the same week, because those 7 to 14 days are most of the difference between a 21-day close and a 45-day one.
How do I work out the break-even on a refinance?
Divide the closing costs by the monthly saving. That gives you the number of months before the refinance has paid for itself, and it is the same arithmetic the CFPB describes. What people forget is the term reset: going from 22 years remaining back to a fresh 30 lowers the payment without lowering what you pay over the life of the loan. Ask for the quote both ways — a new 30-year, and a term that matches what you have left — and compare the total, not just the payment.
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