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Refinancing a Mortgage with Bad Credit

While less-than-perfect credit may reduce your mortgage options, it can be worked around when refinancing a home loan.


Find a Loan Expert

Speak with a licensed loan expert to get a personalized recommendation on a refi loan.


Cash Out Refi

Looking to liquidate your home equity means getting a cash-out refinance loan.


FHA Streamline Refinance With Bad Credit

If you have an existing FHA mortgage, one option is to apply for an FHA streamline refinance. This is a great option if you have a low credit score because a streamline refinance doesn’t typically require a full credit check or income verification.

To qualify, your FHA mortgage with your current lender must be in good standing, meaning you don’t have any late payments. A streamline refinance can help you get a lower interest rate, a lower monthly payment or a fixed-rate mortgage.

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Switching From a Non-FHA loan to an FHA Loan

If you have a conventional loan or a VA loan, you might be able to refinance into an FHA loan--even with a lower credit score. In this case, you can only get a rate-term refinance—meaning you can lower your interest rate and adjust your mortgage terms, but you can’t cash out your equity.

This option is only available on primary residences. To qualify, you must have a good payment history and show at least 12 months of on-time payments. This applies to your mortgage payment and other expenses. You can get approved with a credit score as low as 580.

VA Interest Rate Reduction Refinance Loan (IRRRL)

If you have an existing VA loan (and a low credit score), you may also qualify for an interest rate reduction refinance loan backed by the Department of Veterans Affairs. You might be eligible after you’ve made at least six monthly mortgage payments on your current VA loan.

This is a great option with bad credit because there’s no minimum credit score requirement. With this type of refinance, though, you can’t borrow cash from your equity. If you’re looking to lower your interest rate, adjust your mortgage terms and get cash, you’ll need to apply for a standard VA refinance. This type of refinance isn’t streamlined, so you’ll provide more documentation. However, you can still get approved with a low credit score.

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Other Refinance Options With Bad Credit

The Home Affordable Refinance Program (HARP) helped many distressed homeowners refinance their underwater mortgages. When the program expired in 2018, Fannie Mae and Freddie Mac introduced new programs to help struggling homeowners refinance their mortgage loans. These include Fannie Mae's High Loan-to-Value Refinance Option, and Freddie Mac's Enhanced Relief Refinance Mortgage.

There's no minimum credit score needed with either option. However, your mortgage payment must be current and you can't have more than one 30-day late payment in the past 12 months.

Additionally, you might qualify for a refinance with bad credit by adding a cosigner on your mortgage application. This needs to be someone with good credit. If you default or can't make your mortgage payment, your cosigner agrees to step in and make payments on your behalf.

Apply for a Refinance With Bad Credit

Whether you’re looking for a rate-term refinance or you want to cash out your equity, don’t let a bad credit score prevent getting a better interest rate and a lower monthly payment. Our loan experts can help you reach your financial goals. Let's discuss your refinance options. Contact us to find a loan officer in your area.

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