Refinancing your mortgage is completely possible, even if you have bad credit. However, there are certain things you’ll need to keep in mind. Below are some tips on how to get a mortgage with bad credit.
The first thing to do is to determine whether your home equity is even eligible. Many lenders won’t allow for refinancing if you owe more than the home is worth, meaning you are “underwater.”
Credit scores do have a role in refinancing, so make sure you review your credit reports from Experian, Equifax, and TransUnion. These are the nation’s top credit reporting bureaus.
Your credit scores will probably range between 300 and 850. In the case of credit scores, the higher the better, and most lenders will allow for refinancing for lower interest rates if you have a score of at least 600. The solutions to a score lower than 600 include fixing credit report errors, revising outdated information, and paying your credit card balances.
Refinancing your mortgage can get very difficult if your credit score is lower than 500 and you are currently underwater, but even this is possible. The best option you might come across is to resort to government-insured loans that are offered under specific qualifications and conditions.
As mentioned previously, it’s important to monitor your credit with the three main agencies. You will be alerted to any activities that might affect your credit, as well as your identity status. Having your credit reports on hand will help you improve your standing in the future as well.
Once you understand what you can afford and qualify for, it will be easier to determine how you can refinance your mortgage for much lower interest rates.