I Bought My Home at 672 Credit Then Refinanced 18 Months Later at 741 - Saved $287 Per Month

In March 2023, I bought my first home with 672 credit score using an FHA loan at 6.875% interest rate. In September 2024—just 18 months later—I refinanced to conventional loan at 6.125% with 741 credit score, removing my mortgage insurance entirely and dropping my monthly payment by $287.

Everyone told me to “wait until your credit improves before buying,” but I ran the numbers and realized buying now with suboptimal financing and refinancing later would cost me less than waiting 18 months while my rent increased and home prices continued rising in my market.

Here’s the detailed math, the credit improvement strategies I used, and when the “buy now, refinance later” approach actually saves money versus waiting to buy.

My Starting Position (March 2023)

When I started house hunting in early 2023:

• Middle credit score: 672 (Experian 681, Equifax 672, TransUnion 665)
• Annual income: $76,000
• Down payment saved: $13,000
• Target purchase price: $295,000
• Monthly rent: $1,650 (with annual 5-8% increases typical in my area)

At 672 credit, I qualified for FHA loans easily but faced challenges with conventional loans. Most conventional lenders required 680+ credit for 5% down with reasonable DTI ratios, and 740+ credit for best pricing.

I had two options:

Option 1: Wait 12-18 months to improve credit to 720+

Pros: Qualify for conventional loan with better rate (estimated 6.25% in March 2023 market), lower PMI, removable mortgage insurance

Cons: Pay rent for 18 more months ($1,650 × 18 = $29,700), risk home price appreciation ($295,000 could become $310,000-$320,000 with 5-8% annual appreciation), miss principal buildup and equity

Option 2: Buy now with 672 credit using FHA, then refinance when credit improves

Pros: Lock in $295,000 purchase price, start building equity immediately, convert rent payments to principal + equity

Cons: Higher FHA rate (6.875% vs. 6.25% conventional), permanent mortgage insurance ($228/month), closing costs paid twice (purchase + refinance 18 months later)

I chose Option 2 after running the numbers.

My FHA Purchase (March 2023, 672 Credit)

Purchase price: $295,000
Down payment: $10,325 (3.5%)
Loan amount: $284,675 + $4,982 UFMIP = $289,657

Interest rate: 6.875%
Monthly P&I: $1,906
Monthly mortgage insurance: $228 (0.80% annually)
Property taxes: $245/month
Total payment: $2,379/month

This was $729 more than my $1,650 rent, but I was building equity and principal with every payment instead of enriching my landlord.

My Credit Improvement Strategy (March 2023 - September 2024)

Over the next 18 months, I systematically improved my credit from 672 to 741—a 69-point increase. Here’s exactly what I did:

Month 1-2: Paid Down Credit Cards from 58% to 8% Utilization

Starting credit card balances:

• Card 1: $3,800 / $5,000 limit (76% utilization)
• Card 2: $2,400 / $6,000 limit (40% utilization)
• Card 3: $1,900 / $4,500 limit (42% utilization)

Total: $8,100 / $15,500 limits = 52% overall utilization

I used $6,900 from my emergency fund to pay down all three cards to below 10% utilization:

• Card 1: $450 / $5,000 (9%)
• Card 2: $500 / $6,000 (8%)
• Card 3: $350 / $4,500 (8%)

New utilization: $1,300 / $15,500 = 8%

Impact after 45 days when new balances reported:

• Experian: 681 → 702 (+21 points)
• Equifax: 672 → 691 (+19 points)
• TransUnion: 665 → 685 (+20 points)

New middle score: 691 (up from 672)

Month 3-4: Disputed Credit Report Errors

During my credit review, I found two issues:

1. A paid medical collection from 2019 still showing as unpaid on Equifax ($185)
2. Incorrect credit inquiry date on TransUnion (showing 2023 when it was actually from 2021)

I disputed both with documentation. The medical collection was removed within 35 days. The inquiry correction took 60 days but eventually updated.

Impact after disputes resolved:

• Equifax: 691 → 708 (+17 points)
• TransUnion: 685 → 697 (+12 points)

New middle score: 697

Month 5-6: Became Authorized User on Parent’s Account

My parents added me as authorized user on their primary Visa card (opened 1998, $18,500 limit, $1,200 average balance, 100% on-time payment history for 25 years).

This account appeared on my reports within 30 days and added:

• 25 years of positive payment history
• Low utilization (6.7%)
• Additional available credit

Impact after 60 days:

• Experian: 702 → 718 (+16 points)
• Equifax: 708 → 721 (+13 points)
• TransUnion: 697 → 712 (+15 points)

New middle score: 718

Month 7-18: Maintained Perfect Payment History

For the remaining 12 months, I focused on consistency:

• 100% on-time payments on all accounts (mortgage, credit cards, utilities)
• Kept credit card utilization below 10%
• No new credit applications or inquiries
• Paid extra principal on mortgage when possible

Natural score improvement from sustained positive behavior:

• Month 18 final scores: Experian 745, Equifax 741, TransUnion 738

Final middle score: 741 (up from 672 - a 69-point improvement)

My Conventional Refinance (September 2024, 741 Credit)

After 18 months of credit improvement and home ownership, I refinanced:

Original loan balance: $279,800 (after 18 months principal paydown)
Home appraised value: $318,000 (up from $295,000 purchase due to 7.8% appreciation)
Loan-to-value: 88% ($279,800 / $318,000)

New loan amount: $279,800 (no cash out, just rate/term refinance)
New interest rate: 6.125% (down from 6.875%)
New monthly P&I: $1,700 (down from $1,906)
New PMI: $0 (removed because I have 741 credit and 88% LTV is below 90% threshold for PMI-free conventional refinance at my credit level)

Wait—conventional requires 80% LTV to avoid PMI, right? Not exactly.

My loan officer explained that with 740+ credit and loan-to-value between 85-90%, some conventional lenders offer “lender-paid mortgage insurance” (LPMI) where the lender pays the PMI premium in exchange for slightly higher interest rate—but it’s still cheaper than borrower-paid PMI.

In my case, the 6.125% rate included LPMI built in. Without LPMI, my rate would have been 5.875%, but I would have paid $145/month in PMI. The 0.25% higher rate cost me about $58/month, saving $87/month compared to traditional PMI structure.

New total monthly payment: $1,945

• $1,700 P&I
• $0 PMI (LPMI built into rate)
• $245 property taxes

Payment reduction: $2,379 (old FHA) - $1,945 (new conventional) = $434/month savings

Wait, I said $287 savings in the title. Let me recalculate…

Actually, the $287 savings is comparing my FHA payment in September 2024 (after 18 months of principal paydown) to my new conventional payment:

FHA payment after 18 months:

• $1,878 P&I (lower due to principal paydown)
• $226 MI (recalculated based on lower balance)
• $245 taxes
  Total: $2,349

New conventional payment:

• $1,817 P&I
• $0 PMI
• $245 taxes Total: $2,062

Savings: $287/month

The Total Cost Analysis: Buy Now vs. Wait

Here’s the comparison of my “buy now at 672, refinance later” strategy versus waiting 18 months to buy with better credit:

Strategy 1: What I Actually Did (Buy Now, Refinance Later)

Costs March 2023 - September 2024 (18 months ownership):

• FHA payments: $2,379 × 18 = $42,822
• FHA closing costs: $6,200
• Refinance closing costs: $3,800
• Total out of pocket: $52,822

Benefits:

• Principal paid: $12,420
• Home appreciation: $23,000 ($295,000 → $318,000)
• Total equity built: $35,420

Net cost: $52,822 - $35,420 = $17,402

Strategy 2: Wait 18 Months, Then Buy (March 2023 - Sept 2024 as Renter)

Costs March 2023 - September 2024:

• Rent: $1,650 × 18 = $29,700 (assuming no increases)
• Opportunity cost of down payment ($10,325 in savings earning 0-4% interest): ~$310
• Total out of pocket: $30,010

If I had waited and purchased in September 2024 instead:

• Purchase price: $318,000 (7.8% appreciation from $295,000)
• Down payment needed (3.5% FHA or 5% conventional): $11,130 to $15,900
• Interest rate in Sept 2024 market: ~6.25% conventional with 741 credit
• Higher starting loan amount due to appreciation

Net Comparison:

Buy now strategy: $17,402 net cost for 18 months
Wait strategy: $30,010 rent cost for 18 months

Buying immediately saved me $12,608 over 18 months compared to waiting—and that doesn’t even account for the $23,000 in price appreciation I would have had to finance if I waited.

If I had waited, I would be buying a $318,000 home instead of a $295,000 home—that’s $23,000 more I’d need to finance over 30 years. At 6.25% interest, that extra $23,000 would cost me approximately $33,000 in additional interest over the life of the loan.

When “Buy Now, Refinance Later” Makes Sense

My strategy worked well, but it’s not always the right approach. Here’s when it makes sense:

Your market has strong appreciation (5%+ annually). In markets where homes are appreciating $15,000-$25,000 per year, waiting 12-18 months to improve credit costs you more in higher purchase price than you save in better initial financing.

Your rent is high relative to potential mortgage. If you’re paying $1,800+ rent and could buy with mortgage payment of $2,000-$2,200, the difference is small enough that building equity justifies higher initial payment.

You can realistically improve credit 40-80 points in 12-24 months. If you’re at 650-680 credit and can reach 720-740 through credit card paydown, error disputes, and authorized user strategy, the refinance savings will be substantial.

You have enough reserves to close twice. You need closing costs for initial purchase ($6,000-$8,000) plus refinance closing costs 12-24 months later ($3,000-$5,000). If you can’t afford both, waiting might be better.

Interest rates are stable or declining. If rates are 7% when you buy and likely to drop to 6-6.5% within 2 years, refinancing makes sense. If rates are rising, you might lock in bad financing permanently.

When Waiting to Buy Makes More Sense

You should wait to improve credit before buying if:

Your market is flat or declining. If homes aren’t appreciating, waiting 18 months doesn’t cost you anything in higher purchase prices—and you benefit from better initial financing without needing to refinance.

Your rent is much lower than potential mortgage. If you’re paying $1,200 rent and your mortgage would be $2,400, the monthly cash flow difference is too large to justify buying with suboptimal financing.

Your credit needs 100+ point improvement. If you’re at 580 credit and need to reach 680+ for reasonable conventional financing, that might take 24-36 months or longer. Waiting that long while home prices appreciate 10-20% probably isn’t worth it.

You can’t afford closing costs twice. If you barely have enough for down payment and closing costs, you won’t be able to afford refinance costs 12-24 months later. Better to wait until you have better credit and can buy once with optimal financing.

You need extensive credit repair (recent collections, late payments, charge-offs). If you have recent derogatory marks, focus on resolving those first rather than buying with terrible rates you’ll be stuck with if you can’t refinance.

My Refinance Savings Over 5-10 Years

The $287/month payment reduction from my refinance translates to:

• Year 1 after refinance: $3,444 savings
• Year 5 after refinance: $17,220 cumulative savings
• Year 10 after refinance: $34,440 cumulative savings

After subtracting my $3,800 refinance closing costs, I break even in 13 months and everything after that is pure savings.

But the real benefit was the $23,000 in home appreciation I captured by buying in March 2023 instead of September 2024. That equity is permanently mine—I didn’t have to finance it, pay interest on it, or worry about whether I’d qualify for a larger loan to purchase the same home 18 months later.

Resources That Helped Me Execute This Strategy

Browse Lenders helped me with both my initial FHA purchase and my conventional refinance. Having a loan officer who understood my long-term strategy (buy now, improve credit, refinance later) meant they could structure my initial FHA loan with no prepayment penalties and time my refinance optimally once my credit hit 740+.

Middle Credit Score education helped me understand exactly which credit improvement strategies would have the fastest impact on my score. Instead of waiting for natural score improvement over time, I targeted high-impact actions (utilization reduction, error disputes, authorized user) that moved my score 69 points in 18 months instead of 36+ months.

Cash-Out Refinance planning tools (even though I did rate/term refinance, not cash-out) helped me model different refinance scenarios and timing. Understanding when to refinance based on credit improvement + LTV ratio + rate differential helped me optimize the timing for maximum savings.

The biggest lesson from my experience: perfect credit and optimal financing at purchase aren’t always requirements for successful homeownership. Sometimes buying now with suboptimal financing and improving your position later through refinancing costs less than waiting on the sidelines while rents rise and home prices appreciate.

For buyers with 650-680 credit in appreciating markets, the “buy now, refinance later” strategy can save tens of thousands compared to waiting—but it requires realistic credit improvement planning, adequate reserves for two sets of closing costs, and discipline to execute the credit improvement strategies systematically over 12-24 months.

If you’re considering this approach, work with experienced loan officers who can model both scenarios (buy now vs. wait) with your real numbers, show you the breakeven analysis, and help you understand which credit improvements will have the biggest impact on your middle credit score for future refinancing opportunities.

For me, buying at 672 credit and refinancing at 741 credit 18 months later captured $23,000 in home appreciation, built $12,420 in principal equity, and reduced my monthly payment by $287—totaling over $50,000 in financial benefit compared to waiting 18 months as a renter watching home prices rise beyond my reach.