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Can I Refinance with Bad Credit?

Can I Refinance with Bad Credit?

October 9th, 2019 | Credit, Refinancing a Home

Mortgage interest rates have tumbled in recent months, making refinancing more appealing than ever. As of the latest Mortgage Bankers Association survey, refinance request volume is up 180% over last year. There may be some homeowners who would like to take advantage of the interest rate savings but worry they may not qualify because of poor credit. If you are part of this crowd, here are several ways to make refinancing a reality:

Learn Your Options

Start with an open discussion with a lender. Let them know you do not have the best credit but that you would like to refinance. They have definitely seen your situation before and likely have several programs tailored to your situation. For example, if your current mortgage is an FHA loan, you could qualify for the FHA Streamline Refinance. It does not require a credit check and may not even require income verification. These loans have minimal paperwork and a quick turnaround time. VA loans have their own refinance program that does not require an appraisal or credit checks and it will even allow you to roll the closing costs into the total of the new loan. Your lender may also have their own unique programs that will help you cash in on current rate savings.

Find a Cosigner

If you have a very loving family member with good credit who is willing to help you out, asking him or her become a co-signer on your refinance is one way to boost your odds of qualifying and getting better rates. Their stellar credit history can help negate your less-than-perfect score. This is a huge risk and responsibility for your co-signer though,  so make sure you both understand the potential consequences if you default in the future.

Improve Your Credit

Bumping up your credit score does take time, which means you may miss out on today’s interest rates, but it may be worth it in the end. A better credit profile will help you qualify for lower rates anyway. You can start by pulling a copy of your report and checking for any errors. Correcting these could have an immediate effect on your score. Of course, the biggest impact on your credit is a history of timely payments, so while you’re preparing to refinance, focus on paying all your bills on time. Other credit improvement tips include not opening any new credit accounts and reducing your balances on all accounts to less than 30% of their limits.

No matter which refinancing avenue you decide to take, remember that all mortgage loans require fees and closing costs. These should be factored into your decision to refinance. A lower interest rate is not the only factor to consider in the equation. Be sure that all the costs are clearly spelled out so that you determine if you will truly be saving money with a refinance loan. 

If you have poor credit, you may not be able to qualify for the very lowest rates available, but there are still plenty of options available to help you save money on your current mortgage loan.

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Prime 1 Bancorp, Ltd is not affiliated with any government organization or bank nor do we act on behalf of the FHA or VA. This material is not from HUD or FHA and has not been approved by HUD or a government agency. We are not a Federally chartered or State Chartered Bank. We are an we are an Illinois Residential Mortgage Licensee by the Office of Banks and Real Estate License #MB.6761138, a Colorado Registered Mortgage Brokerage by Division of Real Estate, a Florida Residential Mortgage Brokerage Licensed by the Office of Financial Regulation License #MBR1930 dba Prime 1 Mortgage Inc, a California CFL Licensed Mortgage Brokerage by Department of Business Oversights 60DB055973 and a Texas SML Licensed Mortgage Brokerage by the Texas Department of Savings and Mortgage Lending. Prime 1 Bancorp, LTD Corporate Office is located at 2720 S. River Rd Suite 50, Des Plaines, IL 60018 our Toll Free Number is 888-205-3737. NMLS: 1434638

Loan product availability is subject to qualification of the borrower and loan approval after full review of the file. Not every applicant qualifies or is eligible for every loan program. Some loan products may not be available in all states. Loan approval, note rate and annual percentage rate are dependent on factors including, but not limited to, credit, collateral, income, assets and overall financial history. Not all applicants will be approved for a loan. All loan programs, terms and annual interest rates are subject to change without notice. NMLS: 1434638