Nobody’s perfect. Your credit reports reflect your payment history and can hamper refinancing. If you’re looking to refinance your mortgage, credit dings can cause some gray hairs. Benzinga has pulled together a guide to help you find the best mortgage refinance companies — no matter your credit.
Best Mortgage Lenders to Refinance with Bad Credit
Here are Benzinga’s top picks for mortgage lenders to refinance with bad credit.
1. Rocket Mortgage® by Quicken Loans®: Best for Efficiency
Rocket Mortgage® by Quicken Loans® is the best mortgage company for streamlined customer experience. With a simple preapproval system and direct customer service access, Rocket Mortgage® makes it easy to apply for a mortgage online.
Rocket Mortgage® has the power and flexibility to meet you where you are. Rocket Mortgage® offers options for a cash-out refinance, lowered monthly payment and a shortened loan term. Rocket Mortgage does not publish interest rates online — apply to get your individualized quote.
2. PacShores Mortgage: Best for Working with Bad Credit
PacShores Mortgage offers experience working with bad credit. It provides lending at up to 70% of your home value or purchase price, and nearly all applicants are accepted. And prior bankruptcies, short sales, foreclosures and low FICO scores are all considered.
Alternate documentation is accepted in lieu of financial statements, pay stubs and tax returns. Available loan programs include refinance and purchase of single-family, multi-units and condos, apartments, and commercial and buildable lots. PacShores does not publish rates. Again, apply for your individualized quote.
3. Network Capital: Best for Variety
Whatever your situation, it’s likely that Network Capital can help you get the home loan refinance you need. Its programs include VA IRRRL (a no-appraisal, no-income verification, limited documentation required loan), FHA Streamline (a no-appraisal, no employment or income verification, reduced FICO score loan) and HARP 2.0 (a no-appraisal, lowered loan-to-value, income, asset and FICO credit score loan).
Current refinancing rates are:
- 30-year fixed 3.375%
- 30-year fixed FHA 2.75%
- 5-year fixed 3%
- 5-year ARM is 3.375%
4. Citibank: Best of the Big Boys
Citibank is your best bet among larger banks. In addition to 30-year and 15-year fixed, Citi offers FHA loans, VA home loans and jumbo loans. You’ll enjoy the clout of a big bank with the personalized attention of a smaller organization. The rate on a 30-year fixed mortgage is 3.375%, while the rate on a 15-year fixed mortgage is 3.125%.
Credit Scores and Refinance Rates
It’s normal to worry your damaged credit may affect your ability to refinance. To ease your mind, take a look at the minimum credit score requirements and current refinance rates from companies ready to work with bad credit.
|Mortgage Company||Minimum Credit Score Requirement||Current Refinance Rate|
|Rocket Mortgage® by Quicken Loans®||620||Application required|
|PacShores Mortgage||No minimum||Application required|
|Network Capital||680||30-year fixed 3.375%|
15-year fixed 3%
|New American Funding||620||15-year fixed 2.875%|
|Citibank||620||30-year fixed 3.375|
15-year fixed 3.125%
Can You Refinance with Bad Credit?
Yes, you can refinance with bad credit. However, there are things you should know and steps you must take in order to make it happen.
First, know that refinancing your mortgage can play an important role in your financial life. In a nutshell, a refinance simply replaces your current home loan with a new second loan. After this takes place, your mortgage will be held with the new lender. You will have a new, lower interest rate and a different amount of time to repay the loan.
If your credit history is less than perfect, there are a few reasons you might want to refinance.
- Take cash out of your home. A cash-out refinance may be a good option to help you manage debt, make a large purchase or repair your property. This involves a higher balance than your original loan, and the remainder may be withdrawn in cash. You must have equity in your home to take out this type of loan.
- Adjust loan terms. You can pay off your loan more quickly, switch to a longer loan term or choose a lower interest rate with a refinance loan.
- Get rid of Private Mortgage Insurance. If you have an FHA loan and you put less than 10% as a down payment, you’re carrying PMI insurance on that mortgage. By refinancing to a conventional loan, you can eliminate PMI and save cash.
If you have bad credit, however, be aware that some of the above options may not be available to you. Even with past credit issues, though, you still have other options for a mortgage refinance. These include:
- Taking out an FHA Streamline Refi: Here you can refinance your original FHA loan, minus the typical income verification and credit check. However, keep in mind that your premium cannot increase by more than $50 per month, you can’t have missed a payment in the last year, and there must be a tangible benefit such as a lower interest rate after the refinance.
- Opting for a VA Interest Rate Reduction Refinance Loan: Also known as a VA IRRRL, these loans let you refinance with no appraisal, credit check, or income verification and can be an easy way to refinance your original VA loan. You must be 270 or more days out from closing on your original VA loan and have made at least a half-year’s worth of consecutive timely payments.
If you’re ready to apply, here’s an outline of the refinance application process:
- Choose a lender when you’re sure you fit the company’s application criteria.
- Apply with required documentation and arrange for an appraisal.
- Read your closing disclosure carefully and understand the terms, conditions and costs associated with your new loan.
- Finally, meet your lender at closing to sign documents and make it official.
Keep in mind — work to improve your credit score before you refinance to help you get better terms and lower costs. There are actions you can take each day to improve your credit. Here is the breakdown of the factors that make up your credit score:
- Payment history is the single most important factor and accounts for 35% of your score. Do you pay your bills on time? If the answer is no, now’s the time to change that habit.
- Credit utilization creates 30% of your score. This factor indicates how much you rely on credit rather than cash. To calculate, divide your current revolving credit by the total of all your revolving credit limits.
- Credit history length is 15%. Typically, the longer the better.
- Credit mix accounts for 10%. How well you manage products like car and student loans come into play here, and the more diverse your credit, the better.
- New credit — recently opened accounts and lender inquiries — comes in at 10%. Less is better here.
How Can I Get the Best Refinance Loan Possible?
You don’t have to be perfect, and your financial past doesn’t need to define your future. Do your homework and determine your needs — for the present and beyond. With this clear understanding, you’ll be able to find a lender to help you secure a mortgage refinance loan.
Read all documentation before you sign it. While this may seem obvious, many people neglect the fine print — and regret it. Finally, work to improve your credit so that you can obtain loans more easily and with lower rates.
Frequently Asked Questions
Q: How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
Q: How much interest will I pay?
Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
Q: How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
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