The Quick Read: It depends, and the answer is often yes toward the upper end of fair. A score between 580 and 669 does not automatically block a conventional cash-out, but the wholesale programs Lendmire places files with start at a 620 decision score. The automated finding, the equity left in the home, and your monthly ratios decide the outcome. A fair score mostly raises the cost rather than closing the door.
What Counts as Fair Credit, and Why It Isn’t One Rule
Fair credit is a score band, not a loan tier. Experian puts the fair FICO band at 580 to 669 and the VantageScore fair band at 601 to 660. Mortgage programs don’t use those labels. They use a decision score, an automated underwriting finding, and a loan-to-value ratio (LTV).
That matters because “fair” covers two very different borrowers. A homeowner at 665 and a homeowner at 590 share a label. They do not share a path.
- 620 to 669: Inside the range most conventional wholesale programs accept. Expect a higher cost and closer review.
- 580 to 619: Below the floor of the conventional programs Lendmire works with. FHA or VA may fit better, and rebuilding the score first may fit better still.
One more wrinkle. The score a lender pulls is usually a classic FICO version from each bureau. It can differ from the number in a free app. Check with your loan officer which score is in play before you decide anything.
How a Conventional Cash-Out Refinance Gets Underwritten
A conventional cash-out refinance replaces your current first mortgage with a larger one and hands you the difference. You can use the cash for any purpose. Across the wholesale programs Lendmire places files with, a few gates decide whether that works. Lendmire’s cash-out refinance programs page lays out the product, and the gates look like this:
1. Decision score. The wholesale conventional programs set a minimum decision score that varies by scenario. Some lenders set a higher floor of their own.
2. Automated finding. Software reviews your credit report, income, assets and the property. For most files, that finding governs.
3. Total ratio. Your debts, including the new mortgage, are measured against income. The ceiling on the automated lane is 50%.
4. Leverage. A cash-out on a one-unit principal residence caps at 80% LTV. Two- to four-unit homes cap at 75%, and so do second homes. Occupancy decides the cap, so a rental or vacation property follows different leverage rules than the home you live in. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
5. Seasoning. The first mortgage you are paying off must be at least 12 months old, counted note date to note date. A borrower must also have been on title for six months.
Because the cap is 80%, you keep at least 20% equity in the home. That also means a standard conventional cash-out sits at or below the point where mortgage insurance starts, unlike a 95% purchase. Conventional mortgage insurance is otherwise required above 80% LTV, and one separate wholesale lane, covered below, is built to go past 80% without it. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Picture a homeowner whose current first mortgage equals 55% of the home’s appraised value. The 80% cap limits the new loan to 80% of value, so the cash-out room is the difference between those two percentages, before closing costs are financed in. That room is the ceiling, not the target. Many borrowers take less.
Key Terms Defined
Decision score: The credit score the lender uses to qualify the loan, which may differ from the score you see in a consumer app.
LTV (loan-to-value): The new loan amount divided by the appraised value of the home.
Seasoning: The minimum time you have owned the home, or held the loan being paid off, before a cash-out is allowed.
Overlay: A lender’s own rule that is stricter than the agency minimum.
Reserves: Cash and liquid assets left after closing, which some files must show.
Pricing adjustment: A cost, tied to your score and LTV, that lenders build into the loan’s pricing instead of listing as a separate fee.
Did Fannie Mae Really Drop the Credit Score Minimum?
Yes, for one specific lane. Fannie Mae’s Selling Guide announcement removed the minimum credit score requirement for loans run through its automated system, Desktop Underwriter. The system now relies on its own risk analysis instead of a fixed cutoff, as a law-firm summary from Orrick explains.
Read that carefully. It removed a gate. It did not remove underwriting. The automated finding still weighs your whole profile, and a weak profile can still come back as a refer or a decline.
Two limits keep the headline from becoming a promise:
- Manual underwriting is different. Files that can’t get an automated approval go to a person, and manual loans keep tighter score and ratio rules. The Eligibility Matrix sets manual ratios at 36% or 45%, depending on score and reserves.
- Overlays still apply. A lender can require a higher score than the agencies do. Two fair-credit borrowers can get different answers from different lenders.
The practical read: the agencies loosened the rule, and the lenders still set the working floor. In day-to-day placement, that floor is 620 on the programs Lendmire uses. Sub-620 borrowers should assume conventional cash-out is out of reach for now, whatever the headlines say.
What a Fair Score Costs You
A fair score costs more, and the cost scales with how much of the home’s value you borrow. Fannie Mae’s pricing matrix has separate cash-out tables by score band and LTV band. The bottom band sits at 639 and below.
Lower score plus higher LTV means a bigger pricing hit. The cost usually appears inside the loan’s pricing instead of as its own line item. That is why two offers with the same loan amount can feel very different.
| Factor | Stronger score | Fair score |
|---|---|---|
| Pricing adjustment | Smaller | Larger |
| Same LTV, same loan | Lower cost | Higher cost |
| 89.99% LTV no-MI lane | Reachable at 680+ | Not reachable |
| Lender overlays | Fewer | More likely |
Look at that third row. One wholesale lane reaches 89.99% LTV with no mortgage insurance, which makes it the exception to the 80% cap on the standard cash-out. It requires a 680 score, a 50% ratio ceiling, a thirty-year fixed loan, a primary residence, a conforming balance, and six months of seasoning. It is not written in Texas, where a homestead cash-out is capped by the state constitution at the agency figure. A fair-credit borrower should plan around the standard 80% cap instead. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Here is the tradeoff to weigh. Borrowing less lowers the pricing hit. Taking the full 80% maximizes cash but also maximizes cost. For a borderline file, the lower-LTV version of the loan often comes out stronger on both approval and cost.
What Strengthens a Borderline File
When the score is middling, everything else on the file has to carry more weight. Underwriters call these compensating factors. Some you can influence before you apply.
| Factor | Why it matters | What to do |
|---|---|---|
| Equity cushion | Lower LTV softens pricing | Borrow below the cap |
| Total ratio | Room under the 50% ceiling | Pay down balances first |
| Payment history | Recent lates weigh heavily | Keep every account current |
| Reserves | Cash left after closing | Leave savings untouched |
| Income | Steady, documented income simplifies review | Gather pay records early |
Reserves deserve a note. Minimum reserves can apply to cash-out files with higher ratios, and Fannie Mae’s matrix ties that requirement to ratios above 45%. A borrower sitting at 48% with thin savings has a harder file than one at 38%, and score is not the difference.
Debt payoff is the interesting lever. If the cash-out proceeds retire credit cards, the borrower’s total ratio can fall, because a card minimum disappears and one mortgage payment replaces it. Lenders can require certain debts to be paid at closing. That can help the file, but it also converts unsecured debt into debt secured by your home, which is the risk covered below.
Conventional Cash-Out vs. the Other Routes
Conventional is not the only way to reach equity, and for some fair-credit borrowers it is not the right one. The best choice depends on your score, your current loan, and whether you need cash at all.
| Option | Fits best when | Tradeoff |
|---|---|---|
| Conventional cash-out | Score is 620+ and equity reaches 80% LTV | Pricing climbs as score drops |
| Rate-and-term refinance | You want a new term, not cash | Only incidental cash back |
| FHA or VA cash-out | Conventional pricing or score falls short | Different rules, premiums and fees |
| HELOC or home equity loan | Your current first mortgage is worth keeping | A second lien and a second payment |
A rate-and-term refinance is worth a look if cash is not the point. It reaches 95% LTV on a one-unit principal residence. The new loan pays off the existing first mortgage, the closing costs and a purchase-money second, with only incidental cash back. If your goal is to shorten the term or drop mortgage insurance, that may be the cleaner path.
FHA and VA are the usual next stop for a score that sits below the conventional floor. Their credit rules and costs are different. If you are sitting on an FHA loan today, Lendmire’s article Does an FHA-to-Conventional Cash-Out Refinance Need Better Credit? walks through that exact comparison.
HELOCs and home equity loans leave your first mortgage alone. That can be the smarter move when your existing loan has terms you don’t want to give up. The cost is a second payment and a second lien on the home.
Exceptions to the Waiting Periods
The six-month ownership rule has exceptions, and they matter if you recently bought, inherited, or divorced.
- Delayed financing. A borrower who paid cash can refinance within six months of purchase. Under Fannie Mae’s delayed financing provision, the new loan is capped at the documented initial investment plus financed closing costs and prepaids, and cash-out pricing applies.
- Inheritance and legal awards. Fannie Mae’s cash-out refinance guide waives the six-month wait for inherited property and for property awarded in a divorce or separation. That page is an archived version, so confirm current wording with your loan officer.
- Listed for sale. The same guide makes a cash-out ineligible when the property is listed for sale at disbursement. Take the listing down well before you apply.
Credit events carry their own agency waiting periods. After a chapter 7 discharge it is four years. After a foreclosure it is seven. After a short sale or deed-in-lieu it is four. Documented extenuating circumstances can shorten these, subject to lender guidelines.
If You’re Declined or the Numbers Don’t Work
A decline is information, not a verdict. Most fair-credit declines trace back to a few fixable items, and a sequence works better than a scramble.
1. Get the reason. Ask which factor drove the finding: score, ratio, payment history or LTV.
2. Lower card balances. Utilization is usually the fastest-moving part of a score. It also lowers the total ratio.
3. Dispute real errors. Clear inaccurate items with the bureaus before the lender pulls credit again.
4. Stop new credit. New accounts and inquiries can move a score the wrong way right before an application.
5. Ask about a rescore. After you pay down balances, a lender can sometimes request an updated report rather than waiting for the bureaus to refresh on their own.
6. Reduce the ask. A smaller cash-out means a lower LTV and a smaller pricing hit.
Lendmire’s step-by-step on improving credit before a cash-out refinance covers the same sequence for borrowers moving off an FHA loan.
Waiting is a real option. If you’re at 610 and a few months of clean payments and lower balances can get you to 640, the loan you eventually get may cost meaningfully less. If your need is urgent, the alternatives in the table above may be the better answer.
When a Fair-Credit Cash-Out Is a Bad Idea
Sometimes the right answer is no. The Consumer Financial Protection Bureau notes that closing costs on a refinance can be substantial, and that converting non-mortgage debt into mortgage debt puts your home at risk if payments become unsustainable. Its survey found that paying off debt was the most common reason for a cash-out, chosen by roughly 53% to 66% of respondents depending on the year.
That popularity is not a recommendation. Consider skipping it when:
- The new loan would replace a mortgage with terms you prefer.
- The cash would clear cards while spending habits stay the same.
- The larger balance would stretch your budget, and the payment may rise as the term resets.
- The only way to qualify is a score and ratio combination with no cushion.
Consolidation works best for the borrower whose debt came from a one-time event and whose monthly budget is stable. It works worst for the borrower whose cards refill within a year. Be honest about which one you are.
Where to Go From Here
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Reach the team at 828-256-2183, or start with your current balance, estimated value and score range. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I get a conventional cash-out refinance with a 620 score?
Often, yes. A 620 decision score is where the wholesale conventional programs begin. At that level, expect a larger pricing adjustment, a lower practical LTV, and closer attention to ratios and reserves. A lender may also set its own higher minimum.
Does a cash-out refinance hurt my credit score?
It can dip briefly because of the new credit inquiry and the new account. Over time the effect depends on how you use the proceeds and whether you keep up the payments. The CFPB material shows many borrowers use cash-out to pay down other debt, which can lower card utilization, but that benefit disappears if balances build back up.
How much equity do I need to keep?
At least 20% on a one-unit principal residence, since the cap is 80% LTV. Two- to four-unit homes and second homes cap at 75%, so those need at least 25% equity left in the property. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Is FHA easier than conventional with fair credit?
It can be, particularly toward the lower end of fair, since FHA and VA follow different credit rules than conventional. The tradeoff is different premiums, fees and eligibility. Compare the full cost of each, not just the approval odds.
What if I bought my home recently?
You generally need to have been on title for six months, and the loan being paid off must be 12 months old. Exceptions exist for cash buyers using delayed financing, for inherited property, and for property awarded in a divorce or separation.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Experian: What Is a Fair Credit Score?
2. Fannie Mae Selling Guide Announcement: Minimum Credit Score for Desktop Underwriter Loans
3. Orrick: Fannie Mae Removes Minimum Credit Score for Desktop Underwriter Loans
4. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions (delayed financing)
5. CFPB: Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Credit Cards Are Paid Off in a Conventional Cash-Out Refinance · Can You Use Conventional Cash-Out Refinance Money on Anything? · Will a Conventional Cash-Out Refinance Hurt Your Credit Score?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.