Unlocking Refinancing Options for Homeowners with Bad Credit: A Comprehensive Guide

If you have a less-than-stellar credit score, you may think your mortgage refinancing options are limited. But take heart: It's entirely possible to refinance a mortgage with a poor credit score. While not every option on our list is available to every borrower, these nine possibilities let you know what's out there for low-credit refinances. So, let's get you up to speed on how your current credit, type of mortgage, and home refinancing options line up.

In this article:

1. Chat with your current lender
2. Consider a co-signer
3. FHA Streamline Refinance
4. FHA rate-and-term refinance
5. Fannie Mae ReFi Now™
6. Freddie Mac ReFi Possible®
7. VA IRRRL program
8. USDA streamlined assist
9. Refinance with a lender that caters to those with lower credit scores

When you refinance a mortgage, you replace your current home loan with a new loan on the same property. People refinance for different reasons, but it's often to snag a lower interest rate or monthly payment. Other borrowers use a cash-out refinance to pull money out of their home's equity. Whatever your reasons for refinancing, your credit score plays a role—especially if your score is low because of late or missed mortgage payments. To set yourself up for refinancing success, making on-time payments is essential. Many options below require an on-time payment history of at least six months.

Here are nine options for refinancing with bad credit:

1. Talk to your current lender: Speaking with your current lender may be your best path to refinancing with a low credit score. If possible, contact the loan officer you worked with on your existing mortgage. Talking to someone already familiar with your finances can help put you at ease. By explaining your situation and reasons for refinancing, you may find that this conversation opens up an array of possibilities—some of which might not be refinancing at all. Many lenders offer mortgage forbearances, a temporary payment pause, or other loan modifications that could ease your financial stress.
2. Consider a co-signer: To overcome bad credit and refinance your mortgage, consider adding a co-signer to your refi application. Remember that this is a big ask. Your co-signer will be legally on the hook if you miss payments or default on your loan. Ideally, your co-signer will have good credit—a plus if you hope to lower your current interest rate. Both you and your co-signer will typically go through the standard underwriting process, including credit checks and income and employment verification. If you’re approved to refinance your mortgage, it’s up to you to keep up your monthly payments to avoid co-signer’s regret. The biggest downside for a co-signer? If you default, they’re still responsible for making the mortgage payments while having no legal claim to the house.
3. FHA Streamline Refinance: You could be in luck if your current mortgage is an FHA loan. The FHA Streamline Refinance program is an option that doesn’t require a review of your credit to qualify. An added bonus? There’s no income verification or debt-to