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’s 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. 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.
2. 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%
3. 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.
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, 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 live to 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?
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?
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?
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.
Young Entrepreneur is Proof That Age Does Not Matter in Obtaining a Successful Credit Score
Credit score specialist Alex van Hulle runs a company that helps individuals and families find support to create a strong, long-lasting financial record. Alex has spent many years researching and understanding the crux of financial management. His dedication has paid off, enabling him to secure a solid future for generations to come.
Today, through Credit Alleviation, Alex uses his knowledge to help others benefit from the lessons he learnt. The company offers valuable practical tools and resources to clients who require help in managing their finances and maintaining a good credit score.
“We designed the UCES Protection Plan to support our client’s financial opportunities by implementing positive habits to create and maintain a strong financial future. Our unique collection of services has been carefully selected to provide protection and opportunity over the many aspects of the client’s finances – all combined into one easy-to-use system”, says a spokesperson for Credit Alleviation.
Despite being young in years, Alex has accomplished much and continues to create an impact in the financial world. His most recent decision to provide premium education and motivation free of cost has singled him out in the industry. Alex has a strong commitment to see people be inspired to pursue a positive healthy financial lifestyle. He hopes that through this people would make the right decision for their finances.
“Alex made up his mind to do this because he noticed that most people who want a buy a house, get a new job or upgrade their car get turned down because of bad credit. Lack of proper education and understanding of financial management is the main reason for their failure”, says a spokesperson for Alex van Hulle.
Through Credit Alleviation, Alex hopes that people would understand how valuable it is to take the financial matter seriously. Alex believes that if he can help people realize that securing a solid future and building wealth starts at a young age, it will lead to great things. Just like himself, others too can live debt-free and remain confident as they grow. He shares many years of experience in the industry and delivers professional advice almost daily to thousands of people.
“This is why I continue to post more engaging content on my Instagram page, to encourage people to take their financial life seriously and build a better future”, says the young businessman and aspirant, Alex van Hulle.
Through his Instagram page @credit.alex, Alex van Hulle inspires his followers with motivational quotes, tips, and the latest credit score and finance information. Followers get advice on topics like debt, credit score factors, tax, credit restoration, loan payments, emergency funds, credit card management, creditworthiness, budgeting, etc.
Alex continues to influence many people, both old and young, to make wise financial choices. He uses a creative style of communication with his followers and viewers. It is no wonder this has made him a favorite avenue for getting financial tips that have helped the lives of thousands.
For more information, please visit: https://creditalleviation.org/
Instagram – @credit.alex
4 reasons why your mortgage application could be rejected
When the Federal Reserve lowered interest rates to near 0% last year, mortgage rates followed suit. The average 30-year fixed-rate mortgage hit 2.65% at its lowest, and the average 15-year fixed-rate mortgage bottomed out at 2.16%. At publication, the 30-year FRM sat at 2.96%, and 15-year FRMs averaged 2.30%.
Despite economic uncertainty brought on by the pandemic, these low-interest rates increased enthusiasm in the housing market for potential home buyers. As more people flock to apply for mortgage loans, lenders are tightening their restrictions.
Unfortunately, many potential borrowers have been or will be denied a mortgage loan. Lenders consider several factors when deciding whether to loan money to a borrower. Not only do mortgage lenders consider income, but they also look at debt, credit score, and lifestyle factors. Within such a competitive market, you’ll want to make sure everything lines up if you’re going to get approval. (If you want to get a sense of what preapproved rates you’d get in today’s mortgage rates market, you can check out Credible’s lender marketplace).
There are a few primary reasons your mortgage loan application could be turned down in 2021:
1. Poor credit
One key factor that lenders consider when approving or denying a home loan is credit history. Your credit score is a quick way for lenders to decide whether you represent a trustworthy buyer. The minimum credit score required to purchase a home depends on the type of loan you want. You may qualify for an FHA loan with a score as low as 500 with a 10% down payment. If you want a conventional loan, you’ll need a score of between 620 and 660, and a jumbo loan requires a minimum score of 700.
As lenders tighten their restrictions, borrowers who may have qualified in the past may find themselves shut out of a mortgage loan.
In addition to your credit score, a lender looks at your credit report. You may not qualify for a loan if you have a history of missed or late payments, recent bankruptcy or foreclosure, or wage garnishments. In order to qualify, you’ll need to work on improving your credit score.
If you’re worried that your credit score is too low, you can potentially improve that bad credit by using Credible’s marketing partner Experian to boost your credit. You can add bills like rent and your cellphone payment to your credit score.
2. New or unsteady job
Lenders want to give money to people who have the income to make their monthly payments. They look for employment history and annual or monthly income history to determine if you can afford a mortgage. Ideally, you’ll have employment dating back at least two years. Lenders will want to see pay stubs and tax statements.
However, if you’ve changed jobs recently or your work is more fluid (like freelancing), you may have to provide additional documentation to show that you can afford to make the mortgage payments. Alternatively, you could offer a larger down payment rather than a low down payment.
Common ways to show income include:
- Tax returns
- Pay stubs
- 1099 forms
- Statements from investment income
- Alimony or child support statements
When you’re looking for a loan, make sure to take advantage of an online mortgage calculator to help determine potential monthly payments. The loan payoff calculator can help narrow down your budget, so you choose a loan you can afford.
3. Large, unknown deposit
While having a sizable down payment can make getting a loan easier, having a history of large deposits into your account without records does not. It is perfectly acceptable for someone to gift you money, but you’ll need to provide documentation. If you have a family member or friend who contributes a large sum of money to your purchase, you’ll need to have them complete a gift letter stating the details of the transaction.
When you’re ready, you can explore your mortgage options in minutes by visiting Credible to compare rates and lenders. Check out Credible and get prequalified today.
4. Last-minute spending on a credit card or change to credit report
One of the most common reasons lenders deny a mortgage loan is a change in the credit report. Your lender can deny your loan up until you sign the final paperwork. If you’re approved for a mortgage loan and then use your credit card to purchase furniture for your home, the lender could deny your loan application.
You can prevent having your loan rejected this way by planning. Avoid taking out any loans – like personal loans, auto loans or student loans – or spending too much on your credit card a few weeks before you apply for a mortgage loan. Additionally, don’t make any major purchases until after you sign your final loan documents and the key to your new home is in your hand.
Are you ready to see if you qualify for a mortgage loan? Explore your mortgage options by visiting Credible to compare rates and lenders.
Obtaining a home mortgage loan this year could be challenging. But, if you manage your spending, work on your credit score, and keep good financial records, you can substantially improve your chances of approval.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Can You Get A Student Loan With Bad Credit?
Borrowing a student loan with bad credit can often be a challenge, but it is possible. If you have bad credit, federal student loans are a great place to start, but you can also look into getting a co-signer or finding a lender that uses other factors to determine your eligibility. Here’s how to start.
Options for student loans with bad credit
When you’re shopping for educational loans, any options you review will fit into one of two categories: federal student loans or private student loans. As a borrower with bad credit, you’ll encounter different benefits and drawbacks with each loan type.
Federal student loans
Federal student loans are a form of education financing that’s funded through the U.S. Department of Education. You can use the proceeds from federal student loans to help cover expenses such as:
- Room and board.
If you have credit problems, federal student loans are typically the best place to start. Most federal student loans do not require a credit check to qualify for financing, so bad credit won’t be an obstacle in most cases. PLUS loans are the one exception; these loans will check your credit, although they’re only looking for an adverse credit history and don’t have minimum credit score requirements.
Federal student loans do feature borrowing caps. As a result, these loans might not be sufficient to cover all of your educational costs.
Private student loans
Private student loans are a type of education financing that’s available through private lenders. Online lenders, banks, credit unions and even colleges and universities themselves may offer private student loans.
With a private student loan, the lender will almost always check your credit as part of the application review process. When you have bad credit, securing a private student loan may be a challenge. Bad credit can also impact the interest rate and loan terms a lender offers you — potentially making it more expensive to borrow money if you qualify for financing.
Many private student loan lenders will require you to have a minimum score in the mid- to high 600s to qualify for financing. However, the lender may allow you to apply for a private student loan with a co-signer if you are worried that you won’t be eligible on your own. Just keep in mind that co-signing for student loans comes with its own drawbacks, such as the risk of credit score damage for your loved one.
Most of all, it’s important to conduct your own research if you’re considering a private student loan for bad credit. Comparing offers from multiple lenders has the potential to save you money on interest rates, especially with bad-credit student loans. Over time, those savings could add up to a significant amount of cash.
How to improve your credit score before applying for a private student loan
Because your credit plays a key role in the approval process, it’s wise to make sure that your credit score is in the best shape possible before applying for a new private student loan. Better credit may improve your approval odds and could help you secure better rates and terms when you borrow money.
Here are four steps you can take if you want to improve your credit.
- Check your three credit reports. As you review your credit reports, make a list of any information that seems inaccurate and any negative items you need to address. You can claim a free copy of each of your three credit reports weekly at AnnualCreditReport.com.
- Dispute credit errors. Millions of Americans have errors on their credit reports. Some credit reporting mistakes have the potential to damage your credit score. If you discover errors on your credit report, it’s wise to dispute them right away.
- Lower your credit card utilization. A high balance-to-limit ratio on your credit cards can be bad for your credit score, even if you make your payments on time. You can lower your credit utilization rate (and likely save money in interest) by paying down your credit card balances. A credit limit increase is another out-of-the-box way that could help you to lower your credit utilization if you can’t afford to pay off all of your balances at once.
- Establish positive credit. If your credit report is thin, adding some new positive accounts to it might benefit you over time. Keep in mind that you may want to start with accounts you’re likely to qualify for despite having bad credit or no credit. Secured credit cards or credit builder loans may be worth considering here.
The bottom line
Can you get a student loan with bad credit? There’s a good possibility that you can, and your best bet is starting with federal student loans. But if you need private student loans to help finance your education, bad credit could make borrowing money more difficult and more costly.
Focus on improving your credit as much as possible before you apply for financing. And remember, if you decide to accept an interest rate that you’re not thrilled about now, you can always refinance your student loans in the future.
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