Can I refinance my mortgage if I have bad credit?

This article will help you refinance your home loan if you don’t have the right credit rating. We offer suggestions to increase your interest rate, even though your credit score is not perfect.

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Is it possible to refinance your mortgage with bad credit?

The short answer to your question is yes. It’s possible. A credit score of at least 620 is required if you want to refinance conventionally. If you aren’t quite there, don’t let this discourage you. To determine whether you have enough cash to cover any financial emergencies, a mortgage lender will consider your income and cash reserve. Lenders may accept your low credit score as long as you have strong other aspects.

First, you must know where to begin. For more details try PaydayChampion for free.

Talk to your current lender

Tell your lender that you are looking to refinance. They may have options that work for you. Working with your current lender is the best because they have access to your mortgage history so can quickly determine whether you are eligible for any of their programs.

You can ask your current lender to modify the terms of your loan. He may offer to refinance the loan for a longer term, or even change the terms. While you’ll pay more interest over the term of the loan, it will lower your monthly payments and give your budget some breathing room.

You can also determine your benchmark by determining if you have Private Mortgage Insurance (PMI), if you have not paid more than 20% towards the property purchase. 20% equity. Your mortgage lender will lower your PMI if you have 20% equity in your property. Here’s how it works:

  • Estimate your home. The average cost of a home appraisal is between $ 300 to $ 450. The assessment is charged to the client. However, it may take up to two months to recover the cost after the PMI has been removed.
  • Calculate the amount you owe. Let’s assume that the appraisal was $ 325,000, and that you owe $ 250,000 at present. This means you owe less that 80% of the home’s value, which gives you more than 20% equity. You are eligible to receive a drop in PMI. ($ 250,000 /$ 325,000 = 0.769 or just below 77%
  • Ask your lender to cancel the PMI. Send your mortgage company the assessment and a request in writing to cancel your PMI payments.

Consider a government-guaranteed loan

The government guaranteed loans, such as FHA, VA and USDA mortgages, are for people with little or no cash. These loans are not distributed by regular mortgage lenders, but they are guaranteed by the US government. Lenders are aware that the government will reimburse them if you fail to repay the loan. A government guaranteed loan is a good option if you are looking to refinance your home but have a low credit score. These loans are typically lower than traditional mortgages, even though they have a minimum credit term.


FHA Streamlining Option is available to those who have an FHA mortgage. This allows them to refinance their loans without having to submit income or credit checks. Your mortgage must be current. You will need to pass the standard credit check if you want to change from a conventional loan into an FHA loan.


The Veterans Administration guarantees loans to serving and ex-military personnel as well as their families. You will need to have a minimum credit score of 620 in order to qualify. However, a VA IRRRL (VA Interest Rate Reduction Loan) is available to you to refinance an existing VA loan. As long as you have made the minimum 12 previous payments on time. This requirement may vary from lender to lender. Your current mortgage term may have guidelines set by lenders. A VA IRRRL does not allow for withdrawals.


A USDA loan may be available to homebuyers whose income is up to 115% of that of the median income of the area in which they plan to purchase (or refinance). The property must be in an area that is designated USDA eligible.

You can refinance if you have an outstanding USDA loan. As long as you have paid your monthly payments in the last 12 months, you are eligible.


While we offer this option, convincing a cosigner to refinance your mortgage isn’t as simple as it sounds. You will need to convince someone to assume responsibility for your mortgage in the event that you default on payments. Some lenders also require the co-signer to be listed on the title to the house. A co-signer might not be necessary if you have a low credit score. Mortgage lenders will use your lowest median credit score. The lender will pay more attention to your median score, regardless of how high your cosigner’s credit scores at the three major credit reporting agencies. Let’s assume your scores are 600, 590 and 580. They will use this intermediate score (590), to make a credit decision.

If your median score falls just below the lender’s minimum score, a cosigner with outstanding credit might be enough to convince the lender to refinance the mortgage. If your median score is 665 and the minimum score required is 660, then you might have a chance.

You can always improve your credit score. Take steps to improve your credit score as you go through refinancing options. It may take time, but you can do this.

If you aren’t sure where to begin, check out the top mortgage lenders for people with bad credit. They will direct you in the right direction.

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