If you’ve been thinking about refinancing your mortgage, now is a great time to do so. Falling mortgage rates and rising home values mean that close to 4.5 million borrowers have a financial incentive to refinance, an increase of an impressive 1.6 million people compared to just a few short months ago. The average borrower could save $260 per month by refinancing, with some having the potential to save over $400.
If you have bad credit, you may not think it’s possible to refinance your home, but you’d be surprised at how easy it can be to lower your monthly mortgage payment even with bad credit. Here are a few quick ideas of how to refinance your mortgage with bad credit. Some of them may surprise you.
Ask Friends or Family to Cosign
If you have bad credit, you don’t have to refinance your home alone. You can turn to a close friend or family member who has a good credit score to improve your standing with lenders. With a cosigner, you can get better rates, but just keep in mind that if you fail to pay, your friend or family member is on the hook for what you owe.
Show off Your Savings Account
Nothing says fiscal responsibility like a healthy savings account. Lenders want to know that you’ll be able to repay them, and cash reserves or an emergency fund can make you seem like a much riskier bet when you’re looking to refinance.
Take Advantage of HARP
The Home Affordable Refinance Program, or HARP, helps struggling homeowners who are up to date on their mortgage payments to refinance their homes and achieve a lower rate on their mortgage. The program has helped more than 3.4 million homeowners to obtain a more affordable mortgage.
Ask for an FHA Streamline Refinance
Homeowners who have a loan through the Federal Housing Administration (FHA) may be eligible for a eligible for a streamline refinance, even with credit in the 500 to 600 range. The FHA simplifies the refinancing process, reducing paperwork while improving transparency. You may not even need to get an appraisal for your house.
Highlight Your Best Qualities
If your credit score doesn’t exactly recommend you to potential lenders, then you need to make your application more attractive. Be sure to mention personal qualities and background details that make you seem less risky as a borrower. You can point to a long-standing job, a strong family lifestyle, a blank criminal record, and other factors to prove that you’re responsible and have a steady source of income.