Is Refinancing Possible with Bad Credit?

Is Refinancing Possible with Bad Credit?

Homeowners with a bad credit score will often worry about not being able to refinance their mortgage. However, bad credit doesn’t necessarily mean that you cannot refinance your mortgage and a sub-par rate is often the only price that homeowners will end up paying. 

But this makes sense, right? 

The truth is, most lenders are overloaded with requests for mortgage refinance. With the global economy in such a precarious position, these lenders have also needed to tighten up their standards and requirements. In other words, it’s true that lenders prefer to focus on those with good credit as these homeowners pose a much lesser risk in terms of repayments.

How to Get Mortgage Refinance Approval with Bad Credit

When it comes to bad credit, it’s important to shop around for the right lender. Some may not be willing to work with bad credit but certain lenders will talk with you at the very least. 

For most institutions, they want to see a credit score above 700. However, some lenders will accept credit scores in the 600s and government backed loans are by far the easiest to obtain. In case you might be asking yourself, you can simply contact your credit card company to check this score or create a free account on Credit Karma.

You should also know that some lenders don’t even require a particular credit score and set their own guidelines accordingly. For instance, it’s often possible to refinance your mortgage by adding a cosigner that will provide the lender with some added protection.

And then there’s another question; should you try for mortgage refinance and is it worth it?

Is Mortgage Refinance Worth the Effort?

It’s not easy to answer this question without a proper assessment but individuals with bad credit are likely to have higher interest levels. In this regard, it may not be worthwhile to pursue mortgage refinancing and even with low interest rates, you will still be paying more interest over the long term for any such arrangement.

As for how you can make this decision, it’s worth deciding things like whether you want a lower monthly payment or a different term for the loan. You will also want to ensure that you have secure employment in the long term and one that will allow for future payments.

Final Thoughts

It’s possible to improve your credit score by reducing debt, paying bills on time and taking better care of your finances. Also opting for a mortgage refinance deal is often a smart way to reduce your interest and save money to put toward other debt. However, the cost can be high for those with bad credit so it’s necessary to do the math before going ahead with any offers.

In conclusion, you can certainly obtain mortgage refinance with bad credit but you might want to seek professional advice in terms of whether you should or not. Call City Creek Mortgage today to talk to one of our salary-based loan officers.

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