How to Refinance a Home with Bad Credit

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• Mortgage Refinance Options for Homeowners with Bad Credit •

The average FICO credit score hovers around 695, but if you fall below the average, all is not lost. There are still ways that you can buy or refinance a home. Through persistence, planning, and financial strategy, you can achieve your goals and refinance your home.

If you’re looking to refinance your home but have less than stellar credit, here are some tips for making it happen:

1. Work on improving your credit score

Some great tips for keeping your credit score healthy include: not paying bills late, not closing old accounts, paying attention to your credit report, and not applying for more lines of credit. All of these can help you secure the home loan you’re looking for.

And remember, there are ways to improve your score. One of the biggest impacts on credit scores is having credit cards with greater than 30% utilization. A few tips for managing your credit card bills are options such as becoming an authorized user on an account with a family member who has great credit, watching for errors on your credit file, reducing debt and spending on credit cards, preserving credit history, and consolidating credit cards wisely, if at all.

2. Speak with several lenders

Not all refinance programs and guidelines are the same. We recommend you shop around and speak to several lenders before you decide to lock in your loans so you understand what options are available to you, for the lowest price.

Whether you want to learn how mortgages work or are ready to shop rates and programs, our team can help.

3. Consider getting a cosigner

This is a big ask even for family members, etc. Cosigners with good/great credit can help you get the loan you’re looking for but it may also put them at risk if you do not make the loan payments and if you do not make them on time. This is something to consider if you have family or friends who are willing to cosign for you.

4. You might have FHA refinance options

The FHA Streamline Refinance allows you to reduce the interest rate on the current home loan quickly and often without an appraisal. This refinance option cuts down on the amount of paperwork that has to be completed by the lender, saving you time and money.

5. You might have unique options available

Many lenders offer streamlined alternatives to existing borrowers to lower costs and make refinancing easily accessible. Many banks offer refinancing programs that allow for lower credit score requirements, limited paperwork, and easier asset and income verification.

The VA home loan program for veterans and the USDA home loan program in rural and suburban neighborhoods offer streamline refinancing.

The VA offers a streamlined VA loan to refinance, also called the “Interest Rate Reduction Refinancing Loan.” VA streamline refinancing is simple to execute and can save a lot of money now that the mortgage rates are lower. The VA doesn’t require an appraisal or credit underwriting package and you can also roll the refinancing costs into a new loan or opt for a no-cost refinance.

The USDA streamline program was rolled out nationally this year after starting in 2012 in 34 states. The program is now available in all 50 states. The USDA loans close quickly because of the minimum eligibility requirements. There are no credit report requirements, no home appraisal needed, and no property inspection requirements. The loans also allow you to transfer escrow charges and closings costs to the new loan amount, giving homeowners a no cash out of pocket refinance.

Know your options when you refinance a home with bad credit

Use our refinance calculator tool to get an online loan estimate to help you determine the right option that will work for you.

The Bottom Line

Call us at (858) 880-0195 or email to get started.

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About The Author
Portia Green, REALTOR®

Portia Green is a highly experienced full-time REALTOR® specializing in the representation of Sellers, heralded by her clients as data-driven and an effective negotiator. Producing $25M total in residential sales volume, Portia's goal is to help her clients achieve the best results when selling their homes and to make their experience an enjoyable one. She has successfully sold real estate since 2008 and has gained an in-depth knowledge of local real estate markets & seasonal trends. Portia has achieved a 100% customer satisfaction rating and wants to share her expertise & personal service with you in the sale of your home. When listing your home with Portia Green and Compass, you'll receive the hands-on service you need and desire. Portia will help you manage the entire process of selling your home from pricing, preparing and staging the house, to marketing, negotiating offers, inspections, all the way to closing. She will recommend skilled vendors for any job needed, personally host Open Houses, and ensure that all showings are accompanied. At Compass, Portia offers a wise no-nonsense way to sell your home for the best price and the least hassle. With a keen eye for staging & preparing listings to maximize Buyer appeal, all of Portia Green's listings are professionally photographed using HDR (High Dynamic Range) photography to provide the highest quality photos in the industry. Professionally printed marketing materials are prepared for all Open Houses. We also capture a 3D scan of your home that creates an interactive walkthrough online along with a custom-designed floor plan and targeted digital marketing campaigns on Google & the most popular social media channels. Compass participates in the Multiple Listing Service, which is the local real estate database of homes listed for sale that all REALTORS® use in helping their Buyers find houses. Your home will appear on every real estate website, in its best light, making a stunning camera-ready debut. Portia Green's home valuation expertise and extensive experience in comparative market analysis will help price your home accurately. She has refined her skills to help you pinpoint which features of your home will result in more showings and better results. Her mantra is for you to be ready to sell your home and feel good about that first. Portia knows that home inspectors always find a problem; that drones take some of the best photos in town; and that her eyebrows will grow to the floor in the time it takes her to read everything that's happening with your HOA, but that doesn't mean she won't do it anyway. Eyebrows be damned. You'll always need a place to unplug, connect, dream, grow, or just be yourself. That makes what Portia does even more meaningful. She’s ready to go the extra mile to help you find just the place. Whether you're selling your very first home, offloading an investment property, or want a vacation getaway with passive income, she is attentive to the details of every home sale. Portia helps busy people navigate this crazy real estate market like a pro, so don't be shy. Every great relationship starts with free advice and a friendly chat. Ask as many questions as you need to. Selling houses is her jam!