Are you thinking you can’t refinance your mortgage because your credit score is bad? Don’t keep such thinking because actually, you can. You cannot get access to best loan terms with the lowest interest rates, but you can refinance your mortgage with bad credit. Here are some ways to do that.
Make your application more attractive
Bad credit score borrowers are always considered risky borrowers by the lenders. If you want to refinance with bad credit, you have to show any quality of yours to them that proves you are responsible and you will be able to pay the down payments of your mortgage loan. Show them that you have a stable income. Your refinancing application might get rejected if your income level is not stable.
Look into government refinance loans
There are different government programs available which help people in refinancing their mortgage with bad credit and help in reducing the size of their mortgage down payments.
Home Affordable Modification Program (HAMP) helps homeowners in lowering their mortgage bills to at least 31% of their monthly income.
The Department of Housing and Urban Development (HUD) is an agency which offers free housing counselors to discuss various available options with you. Discussing with an expert and knowing his or her opinion is always a good idea when you are refinancing your mortgage.
Show your savings to lenders
Draw the attention of a lender by showing that you have savings with you in order to refinance your mortgage with a bad credit. Lenders want borrowers to have some funds saved with them like an emergency fund so that you can pay your loan even in an unexpected situation.
Ask someone to co-sign
If you are not sure whether you can refinance your mortgage with bad credit, then find a family member, business partner or a close friend who can co-sign your mortgage loan. Be sure to choose someone for the co-signing who has a good credit score and is financially stable; otherwise, it will not help you in refinancing.
Apply for an FHA refinance loan
You may be eligible for an FHA streamline refinance. Through this program, your refinance application process gets simple as it lowers the amount of paperwork applicants need to complete for refinancing. In this program, you are not required to show an increment in your income level.
Before approving you for an FHA streamline refinance loan, the lender will check your credit score. Lenders expect a minimum credit score of 640, but you may qualify for this loan with a low credit score of 600. FHA streamline refinance programs are also available for those who have access to VA and USDA loans.
Conclusion
Refinancing your mortgage with a bad credit is a little bit difficult but not impossible. With the above mentioned ways, you can lower your interest rate or reduce the down payment size and can refinance your mortgage even with the bad credit.
Try to build a better credit score by keeping a regular check on your credit report, get rid of all your debts and make your credit report look better by removing negative information.
You can convert your bad credit score into a good one if you seriously work on it. Refinancing your mortgage is an important task, so try to maintain a good credit score to avoid any difficulty, and if your credit score is bad, then follow the strategies in order to refinance your mortgage.