{"id":14035,"date":"2024-10-31T15:15:06","date_gmt":"2024-10-31T21:15:06","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=14035"},"modified":"2025-06-04T16:30:57","modified_gmt":"2025-06-04T22:30:57","slug":"how-to-refinance-a-mortgage-with-bad-credit","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/loans\/how-to-refinance-a-mortgage-with-bad-credit.html","title":{"rendered":"8 ways to refinance a mortgage with bad credit"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

You can refinance your mortgage with bad credit by shopping around for low rates, showing proof of income or savings, getting a loan cosigner, and improving your credit score. Other options include considering cash-out refinancing, applying for a VA IRRRL and seeking FHA refinancing.<\/p>\n\n\n\n

Is it possible to refinance your mortgage with bad credit<\/a>? The answer is yes, but it can be a complicated process. Because your credit rating is a significant aspect of any loan application and refinancing process, it\u2019s in your best interest to consider all your options before moving forward. <\/p>\n\n\n\n

Refinancing your mortgage can be an excellent opportunity to gain payment flexibility or even take advantage of a lower interest rate. To avoid leaving money on the table, explore the following options for refinancing with bad credit.<\/p>\n\n\n\n

How to refinance your mortgage with bad credit<\/h2>\n\n\n\n
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1. Talk to your current lender<\/h3>\n\n\n\n

When approaching your current lender about refinancing your mortgage, it\u2019s essential to assess where you stand as a borrower. If you make payments on time and are in great financial health, the lender will likely want to continue doing business with you. <\/p>\n\n\n\n

However, if you have been late on payments and are struggling to cover other financial responsibilities, the lender might be more reluctant to refinance your mortgage. To help with any negotiations, you should check with other banks to find the best interest rate you qualify for. Coming to your current lender after shopping around for prices will give you more bargaining power to get a lower rate.<\/p>\n\n\n\n

2. Show proof of savings or income<\/h3>\n\n\n\n

Showing savings or reliable income can help lenders offer you a competitive rate. For lenders, any proof that a borrower can make payments toward a mortgage will lower the overall lending risk and positively impact the terms of the refinancing agreement.<\/p>\n\n\n\n

3. Get a loan cosigner<\/h3>\n\n\n\n

If you have poor credit, you can use a loan cosigner. A cosigner<\/a> promises to pay any outstanding debts if the borrower can\u2019t pay. This is a big request, so think carefully before approaching someone. <\/p>\n\n\n\n

4. Improve your credit<\/h3>\n\n\n\n

Before visiting your lender to inquire about mortgage refinancing options, you should look at your credit report to determine how to build your credit<\/a>. If your credit report is full of negative items, there are probably some areas where you can make improvements. If any of the negative items are incorrect or false, you have a legal right to have them removed from your credit report. Some companies offer credit repair solutions<\/a> that can help you on your credit repair journey, including filing disputes on your behalf. <\/p>\n\n\n\n

In addition, you can work to make payments on time and in full and reduce your credit utilization ratio. Steps like this can have a long-term positive effect on your credit rating. <\/p>\n\n\n\n

5. Consider cash-out refinancing<\/h3>\n\n\n\n

Cash-out refinancing is a mortgage refinancing option that\u2019s ideal for people who owe less than their house is worth. It\u2019s important to note that a cash-out refinancing option trades your current loan for a cash payment and a larger loan. Lenders can refinance a loan for up to 80 percent of the current market value.<\/p>\n\n\n\n

The amount of money between what you currently owe and what your house is valued at can be a sizable help for short-term debts. Keep in mind, though, that you\u2019ll still be responsible for paying back the new and larger loan in the long term.<\/p>\n\n\n\n

6. Apply for a VA IRRRL<\/h3>\n\n\n\n

If you have an existing mortgage guaranteed by the U.S. Department of Veterans Affairs (VA), you can apply for an Interest Rate Reduction Refinance Loan (IRRRL)<\/a> to help decrease your monthly payments.<\/p>\n\n\n\n

You\u2019ll need to meet the following requirements to qualify for the IRRRL:<\/p>\n\n\n\n