Can I refinance my mortgage with bad credit?
Refinancing your mortgage is more difficult with bad credit, but it can still be possible.
Credit requirements vary depending on the type of refinance loan and the lender. Some mortgage refinancing options are available for people with credit scores between 500 and 600.
How to refinance your mortgage with bad credit
Here are some tips for refinancing with a lower credit score:
Shop around with at least three mortgage lenders, including your own mortgage agent.
Submit requests within two weeks to minimize the impact of lender inquiries on your credit score.
Consider government-backed refinance programs, such as FHA loans, which have lower credit score requirements than conventional loans.
Focus on building up your credit if you can’t refinance now.
Mortgage Refinance Options For Bad Credit
Here are some mortgage refinancing options to consider if your credit score is lower:
FHA Refinance Loans
FHA loans, which are insured by the Federal Housing Administration, have less stringent credit requirements than other types of mortgages.
FHA streamline refinancing
To be eligible for FHA Simplified Refinance, your current mortgage must be an FHA loan and you must be up to date on payments.
There are two types of FHA simplified refinance loans: qualifying and non-qualifying loans. The credit eligibility option requires a minimum credit score of 580. FHA’s non-credit simplified refinance does not require the lender to perform a full credit check or calculate your debt-to-income ratio. The wrong side? You can pay a higher interest rate than with the credit version. A house appraisal is not required for either of the two options.
FHA rates and term refinancing
You can refinance any type of mortgage, such as a classic mortgage, into FHA rate and term refinancing. “Rate and Term” simply refers to the ability to get a lower rate or change the term of the loan. The lender will perform a credit check and calculate your debt-to-income ratio. The FHA requires a minimum credit score of 580.
Refinancing of FHA collections
A Refinancing of FHA collections allows you to tap into the equity in your home. The new loan can be up to 80% of the value of the house. The FHA requires a minimum credit score of 500 for a cash refinance, but lenders may require higher ratings.
VA refinance loans
Guaranteed by the United States Department of Veterans Affairs, VA loans are intended for military service members, veterans, and eligible surviving spouses. The VA does not impose a certain credit rating for purchasing or refinancing loans, but lenders may have their own requirements, which can be as high as 660.
Will streamline refinancing
If you already have a VA loan, you can refinance with a VA interest rate reduction refinance loan to reduce the interest rate or go from an adjustable rate to a fixed rate. This loan is also known as Will streamline refinancing because the process is simplified. The VA doesn’t require a new credit check or reassessment for a streamlined refinance, but the lender could.
Refinancing of VA collection
Qualified homeowners can refinance a conventional or VA mortgage with a VA withdrawal refinance. This refinance loan allows, but does not require, eligible borrowers to tap into their home equity. It also gives the possibility to save money with a lower interest rate, to switch to a fixed rate mortgage loan at adjustable rate or, if you have a classic loan, get rid of private mortgage insurance.
Streamlined USDA Help Refinance Loans
USDA mortgages are for rural home buyers and are backed by the US Department of Agriculture. You must have a USDA Mortgage to take advantage of the simplified assisted refinancing loan. In most cases, the program does not require a new credit score, debt-to-income ratio calculation, or home valuation. However, you must have been up to date on your mortgage for the 12 months preceding the application.
Refinancing options for underwater mortgages
There are two programs that can allow you to refinance if you owe more than the value of your home: the Freddie Mac Enhanced Relief Refinance and the Fannie Mae High Loan-Value Refinance Option. Both programs are for homeowners who otherwise would not qualify for refinancing because they owe more than 97% of the value of their home. They replace the Home Affordable Refinance Program, known as HARP, which operated from 2009 to 2018.
Reconstitute your credit to refinance
If you can’t refinance now because of a bad credit rating, focus on rebuilding your credit. Here’s the good thing: it’s possible to raise a low score fairly quickly. Small actions, such as paying bills on time and using a smaller percentage of your credit limit on credit cards, can have a big impact. Get your free credit score and track changes.