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. Bad credit mortgage refinances are now available in all states but from only a handful of lenders.
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 Lenders in your area by completing the request quote page. We are connected to the lenders who can help can do this 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.
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 score. It will also show you how you can improve your credit on your own and also where you can check your credit score.
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. Some bad credit refinance lenders will 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. Bad credit refinance lenders 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 to the bad credit lenders. Lenders typically require a minimum of a two year work history either in a job or two years in your own business. However, we are connected to some lenders who will 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 bad credit refinance lenders, you can decide which program will work best for you.
- Subpime Mortgage Options – There are subprime lenders who will 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 lenders 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 ven 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 lenders who can get you a bad credit FHA refinance with scores as low as 500. Read more about FHA Mortgages and FHA Mortgage Lenders.
- 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 Bad Credit Refinance lenders to see if you do qualify.[/vc_column_text]
Bad Credit Mortgage Refinance Summary
Your takeaway should be if you have bad credit and need to refinance, then there are options for you. Your best situation will be to improve your credit if you can so you can get the best rate and terms possible. If you must refinance now and do not have the time to work on your credit scores, then click to complete the contact form and we will discuss your bad credit mortgage refinance options with you.
FAQ About Bad Credit Mortgages Refinances
What does your credit score need to be for a bad credit mortgage Refinance?
You don’t have to improve your credit score before qualifying for a bad credit mortgage. However, even if you have a score that is below 600, you should still be able to refinance yoru mortgage.
Should I apply for a bad credit mortgage refinance now or wait until my credit scores improve? If you wait for your credit scores to improve, then you will likely get a better interest rate. However, if you cannot wait to improve your credit scores then you can get a bad credit mortgage refinance now.
Can you refinance if you are behind on your mortgage?
If you have late mortgage payments then it may prevent you from refinancing your mortgage. Many lenders are fearful of borrowers who are not able to make mortgage payments and if you do not have some other compensating factors, then it may be difficult to get approved. The only way to know for sure is to speak with us so we can discuss your situation together.
Are there bad credit mortgage refinances for those with a credit score under 600?
There are programs for scores under 600 we are able to help you to get a mortgage if your score is as low as 500. However, the lower your credit score, the lower the loan to value ratio requirement will be.
We are able to help you to find you a bad credit mortgage refinance lender 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.