Blog Layout

The Best Ways to Refinance a Home with a Bad Credit

Ken Venick • Feb 07, 2019

The main reason homeowners refinance home mortgages  is for a lower interest rate, lower  monthly payment or the chance to shorten the term of their mortgage. Refinancing may be a great option to consider if it means you will be saving money on your existing mortgage.

If you have a bad credit score it can put you at a disadvantage. Your credit score is an important factor that lenders consider when determining your eligibility for refinancing. If you aren’t offered the best interest rates or loan terms, don’t let that deter you. Refinancing is still an option even if you’ve had to file for bankruptcy.

Here are a few ways you can refinance your mortgage with bad credit.

Improve your credit score

FICO credit scores range from 300 to 850, but lenders usually want a score at least 520. The higher your credit score, the more likely lenders are going to offer you better loan terms. One of the best ways to achieve a higher credit score is by keeping your balance under 50 percent.

If your credit score isn’t up to par, here are a few ways to improve and keep your credit score healthy:

  • Pay your bills on time
  • Avoid opening any new loans or lines of credit
  • Don’t close any old accounts
  • Create a budget
  • Keep your credit utilization low (30%)
  • Pay any outstanding debt

Although you may not see any immediate changes, your credit score will improve over time, which is how you can secure a loan for refinancing.

Show that you have savings

Lenders typically consider homeowners with bad credit scores as risky borrowers. Showing that you have savings, an emergency fund or even some source of income will make your application more attractive to lenders.

For example, if you’ve worked at the same job for ten years, that’s something you can bring their attention to. If you can show your financially responsible and/or have a stable source of income, they will be more likely to consider you for refinancing.

Ask for a co-signer

Another way you could get help refinancing your mortgage is by asking a family member or friend to co-sign your loan. The co-signer has to have a good credit score and overall financial stability. However, the person will be held financially responsible if you aren’t able to make the payments, which puts their credit at risk.

This is something  to consider when asking a family member or friend to co-sign your loan. It’s a big commitment for you and your co-signer, so make sure you’re both on board beforehand.

FHA Streamline Refinance

If you already have a loan through the Federal Housing Administration, you may be eligible for FHA Streamline Finance. This is a program that allows homeowners to refinance their mortgage, without heavy scrutiny towards your credit score. It eliminates the amount of paperwork and it’s likely that you won’t have to go through an appraisal.

This is a really great option to look into if you’re struggling to get approved for a mortgage.  In order to qualify for this program, besides already having an FHA loan , you must show that you will benefit from refinancing, such as a lower interest rate or monthly payment.

Final Thoughts

It’s difficult to refinance home mortgage with bad credit, but it isn’t impossible. If you use the above strategies to your advantage, you may be able to lower your payment and interest, so you can pay off your mortgage debt sooner.

By Ken Venick 27 Sep, 2021
Buying a home can be very intimidating and the no strings attached feeling renting can give someone sometimes seems like the easier option. But that isn’t always the case. There are many situations where it makes more sense to purchase your home instead of continuing to rent it year after year. There are alot of […] The post The Benefits of Buying A Home Over Renting appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 15 Sep, 2021
Due to the pandemic, there have been a lot of people purchasing homes or even refinancing. It is important to understand the different types of loans that are offered to make sure the buyer knows their options.      Ken Venick has been in the mortgage loan business for over 30 years and is your […] The post Learning and Understanding The Different Types of Loans appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 03 Sep, 2021
Find yourself wondering what a mortgage broker is? A mortgage broker acts as an intermediary between the borrower and the lender and controls transactions between the two. They take care of finding the best mortgages and interest rates by using their personal network of financial institutions and lenders.    Working with a mortgage broker is […] The post Understanding What A Mortgage Broker Does appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 27 Aug, 2021
Just bought a fixer upper that needs a lot of work? A home renovation loan gives the homeowner the funds needed to not only purchase the home, but fix it up as well. A home renovation loan should only be considered if the renovation of the home will increase the property value or reduce long-term […] The post What is a Renovation Loan? appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 20 Aug, 2021
Congratulations, you are looking to buy a new home! This is such an exciting time in your life, but it can also be an expensive one. When it comes to buying a home there will be plenty of hidden expenses you may not have taken into account when you decided to become a homeowner. It […] The post Hidden Expenses When Buying A Home appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 13 Aug, 2021
The home buying process starts with figuring out the location of where you want to live. This can be extremely overwhelming with a lot of different scenarios to think about and a lot of decisions to make. Here at Ken Venick, we want to make the home buying process as easy as possible and that […] The post 5 Important Tips A Homeowner Should Know When Narrowing Down An Area To Live In appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 06 Aug, 2021
On the road to buying a new home? Is your lender requiring you to have a co-signer in order to get your loan? We break down the requirements of a co-signer to give you a better understanding as to why you may need one in the first place.     A co-signer is someone (like […] The post Why Is Your Lender Requiring You To Have A Co-Signer? appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 26 Jul, 2021
The Federal Reserve has said it will keep it’s interest rates close to zero, but it wont stay this way for long. Homeowners have been quick to put their houses on the market since more and more buyers are on the prowl are on the hunt for a new place to call home.      […] The post Money Moves To Make When Your Interest Rates Are Low appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 19 Jul, 2021
Home renovations are one of the hottest topics in 2021. It gives an owner the chance to turn their space into exactly what they need it to be, whether they have just moved in, making more room, or getting ready to put it on the market. Home renovations can increase the value of a home […] The post 5 Home Renovations With The Highest and Lowest Returns appeared first on Owings Mills & Lutherville Mortgage.
By Ken Venick 29 Jun, 2021
It may take weeks, months, or even years to find your dream home. And one you find it, you want to do everything you can to secure it. There’s always the fear that someone else can snatch it up — which means you need to seal the deal with a competitive offer!    In this […] The post Top Ways To Show A Seller Your Offer Is Legit appeared first on Owings Mills & Lutherville Mortgage.
More Posts
Share by: