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.
Quick Look: Best Bad-Credit Mortgage Refinance Companies
- Best for Efficiency: Rocket Mortgage® by Quicken Loans®
- Best for Working with Bad Credit: PacShores Mortgage
- Best for Variety: Network Capital
- Best of the Big Boys: Citibank
Best Mortgage Lenders to Refinance with Bad Credit
Here are Benzinga’s top picks for mortgage lenders to refinance with bad credit.
1. Best for Efficiency: Rocket Mortgage® by Quicken Loans®
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.
Why We Love It: Rocket Mortgage has become one of the go-to lenders for those seeking mortgage refinancing with bad credit due to its flexible loan products and personalized approach. They offer FHA loans, which allow credit scores as low as 500 with a 10% down payment, and VA loans for military members and veterans with no minimum credit score requirement.
2. Best for Working with Bad Credit: PacShores Mortgage
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.
Why We Love It: PacShores Mortgage provides manual underwriting for borrowers with unique financial situations, taking a personalized approach to evaluating credit history and mitigating factors. It has a team of experienced loan officers who guide you through the process, offering competitive rates and efficient closings.
3. Best for Variety: Network Capital
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).
Why We Love It: Network Capital provides stated-income loans and non-prime loans tailored for individuals with lower credit scores or past credit issues.
4. Best of the Big Boys: Citibank
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%.
Why We Love It: With a variety of programs available, including FHA and VA loans that have more lenient credit requirements, Citibank makes it possible for many homeowners to take advantage of lower interest rates and better loan terms through refinancing. Additionally, Citibank's knowledgeable loan officers provide personalized guidance throughout the refinancing process and its online tools and resources help borrowers understand their options and make informed decisions.
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.
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.
Why Should You Consider Refinancing if You Bad Credit?
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.
Other Options for Mortgage Refinance
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.
How to Apply for a Refinance
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.
Improve Your Credit Score Before Refinancing
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
What is considered a bad credit score for mortgage refinancing?
Generally, a credit score below 620 is considered subprime or bad credit for mortgage refinancing purposes. However, lenders have different criteria, and some may accept scores as low as 580 or even lower.
What types of mortgages are available for bad credit refinance?
FHA, VA, and USDA loans typically have more lenient credit requirements than conventional loans. Some lenders also offer portfolio or non-prime loans for borrowers with poor credit.
Can I refinance with a co-borrower or co-signer with better credit?
Yes, adding a co-borrower or co-signer with good credit can potentially help you qualify for better terms and interest rates when refinancing with bad credit.