Bad Credit Mortgage Refinance Options in 2026

Bad Credit Mortgage Refinance Options

A bad credit mortgage refinance is one where the home buyer can get approved to refinance a home despite having bad credit or low credit scores. Bad credit lenders will approve your loan based upon other positive compensating factors. The lender is accepting a higher level of risk which means the interest rate may be slightly higher than that of a conventional loan. 

You can refinance a mortgage with bad credit, but your options may be limited to specialized loan programs, government-backed loans, or lenders that work with low-credit borrowers. By comparing programs like FHA streamline refinances, VA IRRRLs, or non-prime loans, homeowners with poor credit can still lower their payments or access cash-out equity.

Many people have had some unfortunate credit incidents which have resulted in very bad credit. The important thing now is to position yourself so that you can refinance your home. We can help you with this and to find the best bad credit mortgage refinance options in your area by completing the request quote page. One of our loan officers will contact you to discuss your options.

*For more than two decades, we have helped thousands of people with bad credit refinance their homes. We are confident we can help you to refinance now, or create a path to where it is possible for you.

Do These Bad Credit Mortgage Refinance Issues Pertain to You?

• Have low credit scores and cannot qualify for a mortgage with other lenders?
• Had a bankruptcy or foreclosure?
• Have late payments on your existing mortgage?
• Want to consolidate your bills into one low monthly payment?
• Need relief from the harassing calls of creditors?
• Need extra cash?
• Temporarily unemployed or in between jobs?

If you answered “yes” to any of these questions or if your credit score is less than 620 or even  as low as 500, then we can help you with refinancing your mortgage even with bad credit!

Please take a moment to complete the contact form and a professional loan officer will provide you with a free personal consultation to see what makes the most sense for you.

See if You Qualify For a Bad Credit Refinance Now

What Exactly is Bad Credit?

Bad credit when applying for a mortgage, bad credit is anything below a score of 620. Most lenders will not approve your loan if you have scores below that. The large banks such as Suntrust and Wells Fargo will not touch a borrower who has poor credit. They only want the best credit scenarios and their lending guidelines are not very flexible. They do not even have programs for bad credit and their rates are not that great either.

The traditional lenders who offer government programs such as VA, FHA and USDA loans also will not accept poor credit scores.

Your credit scores are not the only thing that a lender will look at when deciding whether you have bad credit. The other thing is whether you have any late mortgage payments over the past 12 months. This is a huge negative if you are trying to refinance with bad credit. If you had a bankruptcy in the past then some lenders will put you in that bad credit category even if your scores are higher.

If you would like a chance to qualify for a conventional mortgage with good credit, then the best read this article on how to improve your credit scores. It will also show you how you can improve your credit on your own and also where you can check your credit score.

Click to see if you qualify for a bad credit mortgage refinance now

Why Are People Refinancing with Bad Credit?

There are multiple reasons why you may need to refinance now with bad credit versus waiting until your credit improves.

Lower Interest rate or payments – You may find yourself in a situation where interest rates have come down and you would like to refinance now to lower your rate and/or payments.

Cash out equity – If you need to cash equity out of your home, you may qualify with bad credit. The likely option would be an FHA loan up to 80% of your home’s appraised value.

Remove someone from the mortgage – We have many clients who are splitting up with a spouse and need to remove them from the mortgage as part of the separation or divorce agreement. In these situations, timing as it relates to your credit score may not be perfect.

Balloon Payment or Loan Maturity – If your existing loan has a large baloon payment coming up or the loan is about to expire, then there may not be time to wait for improved credit scores.

If any of these situations apply to you, then we can help.

How to Qualify for a Bad Credit Mortgage Refinance Today

Qualifying for a bad credit mortgage refinance will depend upon a few factors which include your employment status, credit score, and if you had a negative credit event in the past two years. Here are the basic qualifications for a bad credit refinance:

• Credit Score – The lowest credit score allowable for a bad credit mortgage refinance is 500
• Bad Credit Down payment – The minimum down payment will be 10% for a bad credit refinance  If you had a recent bankruptcy, then your minimum down payment will be 20%.
• Income Requirement – You can qualify up to a 50% debt to equity ratio using your W2s if you are a salaried borrower or using your bank statements if you are self employed.
• Bank Statements – If you are self employed then you will likely have to provide 12 months bank statements. For salaried or W2 wage earner, you will need to provide a minimum of 2 months bank statements.

Compensating Factors for a Bad Credit Mortgage Refinance

When trying to qualify for a bad credit mortgage refinance there may be some compensating factors that can help you to qualify despite having bad credit. These compensating factors all add up so the more of these that can add weight to your refinance application, the better off you will be.

• Lots of Equity in Your Home – If you have a lot of equity and your refinance is less than 80% of the value of your home, then you have a better chance of getting your bad credit refinance approved.  The lower the LTV, the less risk there is for the lender. For them, it means that they would be able to quickly sell your home and get their money back out in the event that they have to foreclose.
• High Income Levels – Having high income and steady (long history) will be a positive compensating factor in your bad credit refinance because it is comforting to the lender to know you will have money coming in to make the payments.
• Low Debt to Income Ratios – The debt to income ratios are also tied to your income. A low ratio basically means that your total monthly debt including your new proposed mortgage payment is low compared to your total gross income. We can approve your mortgage if your DTI is 50% or even higher. However, if your DTI is below 40% then this will be viewed as a positive compensating factor.
• Cash Reserves – If you are refinancing your bad credit mortgage, it would be a positive compensating factor if you had a lot of cash reserves on hand. Underwriters will feel comfortable knowing that you will still be able to make some payments even if you lost your job temporarily.
• Steady Employment History – Working in the same place for a long time is another positive thing during the application review process. Many lenders typically require a minimum of a two year work history either in a job or two years in your own business. However, we can make exceptions to the two year work history requirement. A long work history is a positive compensating factor.

Bad Credit Refinance Programs and Options

These are just a few bad credit refinance programs that you could qualify for depending upon your situation. After talking to one of our loan officers, you can decide which program will work best for you.

• Subpime Mortgage Options – There are subprime options where you can refinance your mortgage with bad credit even with credit scores as low as 500. You will need some compensating factors referenced above and your interest rate could be slightly higher.

• VA Home Loans – If you currently have a VA loan and you find yourself with really bad credit, one of our loan officers may be able to get you a bad credit VA refinance. Traditional lenders require a minimum score of 620 but we can help if your credit scores are much lower than that.
• Bad Credit FHA Refinance Loans – If you currently have an FHA loan and find that your credit has deteriorated since you purchase your home, we can probably help. We have the ability to get you a bad credit FHA refinance with scores as low as 500.
• USDA Refinance Loans – If you live in a rural area and have a USDA loan ad you have bad credit, then we may be able to find you a bad credt USDA refinance.
• Bad Credit Refinance After Bankruptcy – If you have a bankruptcy in your history and need to refinance, then we can find a program for you. Your loan to value ratio will likely need to be less than 75% but it can be done.
• HARP – Home Affordable Refinance Program – This is a refinance program that was put in place after the mortgage meltdown of 2008 to help homeowners whose homes are “under water” (owe more than what the home is worth). This enables them to refinance to have a lower payment and interest rate.
• FHA Streamline Refinance Mortgage – This program is eligible for individuals who already have an FHA mortgage on their homes. The FHA streamline refinance program does not require a credit check or income verification. It is important though for you to have been making payments on time with your existing FHA mortgage.

These are just a few options and there are others also depending upon your personal credit and loan situation. We suggest speaking with one of our loan officers to see if you do qualify.[/vc_column_text]

United Mortgage Corp., NMLS #1330

We are able to help you to get approved for a bad credit mortgage refinance mortgage in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.