You might be in luck if you’ve delayed trying to refinance your home loan because of a poor credit score. Mortgage refinancing options exist for people with bad credit. You may be able to refinance with a non-occupant co-client, a Federal Housing Administration (FHA) streamlined refinance, a cash-out refinance, or a VA interest rate reduction refinance. Find a mortgage refinance lender and discuss your specific options.

Why refinance?

When you refinanceyou’re essentially taking out a new mortgage that pays off the old one. You may want to do this to change the terms of the loan, get a better interest rateor drop mortgage insurance. (If you put less than 10% down on your home or have an FHA loan, you must complete mortgage insurance until you have 20% equity built up in your home. Then you can refinance to drop the insurance.) You may also want to take a refinancing loan with cash withdrawal and use the extra money to pay off debt or improve your home.

You apply for a refinance loan the same way you did for your original mortgage. You choose a lender, see if you meet their qualifications, and fill out a loan application. You will usually need all your supporting documents, such as bank statements and payslips. You will probably also need a house assessment.

Refinancing with Bad Credit

Although your credit score is an important part of qualify for a refinancing loansome options might help in this situation.

Apply with a non-occupant co-client

Much like a cosigner on an auto or personal loan, a non-occupant co-client is someone who doesn’t live in your home but is willing to take a chance as a co-borrower. This could be a parent or grandparent. Essentially, they also take responsibility for the loan if you don’t make the payments. The reason why a co-client What helps is that lenders look at both of your credit scores and count your co-client toward your income-to-debt ratio.

Even though your co-client may have an excellent credit score, you will still need to meet the minimum credit score requirements for your lender to qualify. However, having a co-client could give you the boost you need to qualify for the loan. Make sure your co-client understands that they are also responsible for the loan with you.

Get an FHA Streamlined Refinance

If you have a current FHA loanthis option could allow you to refinance it more easily. With a streamlined refi, you won’t need as many documents, you may not need a new appraisal, and the eligibility requirements are more lenient, including credit score.

If your current loan is not an FHA loan, you will not be able to use this option. However, if this is the case, you can benefit from simplified refinancing if you meet these conditions:

• You will still need to do a credit check and get approval.
• After you refinance, you’ll need a tangible net benefit, like a lower payment, lower interest rate, or better terms.
• With the new simplified refi, your monthly payment cannot increase by more than $50. If so, you will need to qualify for a full refinance loan.
• To qualify, you can only have one payment 30 days late in the past year and no late payments in the last six months.

Take out a refinance with cash withdrawal

Most lenders require at least a 620 credit score to take a refinancing loan with cash withdrawal. If you qualify, you may be able to use your home equity to pay off additional debt. For example, if you owe $185,000 on your mortgage but your home is valued at $230,000, you may be able to refinance for a larger amount, such as $200,000. This amount would pay off your old loan and provide you with $15,000 in cash to pay off other debts to improve your overall financial situation.

Since mortgage debt costs much less to finance (mortgage interest currently hovers around 6.5% annual percentage rate (APR), while credit card interest often exceeds 23% APR well), Consolidating your debt and rolling it into your mortgage can make sense if you have a lot of debt.

Try a VA Rate Reduction Refinance Loan

As with an FHA streamline refinance, the VA has a Interest Rate Reduction Refinancing Loan (IRRRL) for people who have a VA loan. Again, most lenders require a credit score of 620, but if you qualify and have a VA Loanthis refinancing can save you money. Just like other refinancing programs, you must meet certain conditions to qualify for the VA IRRRL:

• You must have a VA loan.
• You must have made the last six consecutive mortgage payments on time.
• You cannot withdraw money with this refinancing.
• There must be at least 210 days between your first payment on your original loan and your refinancing.

Use a USDA Refinance Loan

Similar to the VA or FHA Streamlined Refinance, if you hold a USDA Mortgageyou may be eligible for one of the USDA Refinance Loans. These include non-streamlined, streamlined and streamlined assistance. Note that these are not cash-out refinance loans and can only be used for 30-year fixed USDA mortgages.

The essentials

Even if you have substandard credit scores, there are still some options to refinance to a higher interest rate loan, get a better interest rate, lower payment, get cash outs to pay off your debts or being able to abandon your mortgage insurance. All of these things can put you in a better financial situation. Check with your preferred lenders to see if you might qualify for one of these refinancing loans.