Seeking refinancing on your home loan can be a step in the right financial direction for you and your budget. Refinancing can:

• Lower your interest rate
• Reduce your monthly payment obligations
• Lower the amount you owe overall on the loan

However, if you have poor credit, it can be more challenging to obtain refinancing approval with a lender; it’s not impossible, however. See below for tips on how to refinance your home with bad credit.

Take Steps to Improve Your Credit First

Before seeking refinancing, it’s crucial to see if there are steps that you can take first to improve your score, thus improving your odds of approval with a lender.

• Are there any debts you can pay down to reduce your debt utilization and improve your score?
• Is there anything on your credit history, potentially bringing down your score, that shouldn’t be there?
• Are there any late payments that you can bring up to date within a reasonable amount of time?
• Are there any marks, such as tax liens, that you can address to have removed from your credit report?

Speak to Your Current Lender

If you have a good payment history with your current lender, it’s a good idea to speak with them first before shopping around with a new lender. Because of your already established relationship, your current lender may be more willing to work with you on a refinance than a new lender would due to your poor credit history.

Speak to Other Lenders

Even if your current lender is offering you requested refinance terms, it’s still a good idea to shop around with other lenders first to see if they can offer potentially better terms or lower payments. Despite having bad credit, you may find another lender is willing to provide you with terms that can save you a lot of money monthly, or throughout the lifespan of the loan.

Consider Applying for HARP

HARP (home affordable refinance program) is a program that can help those who have mortgages initiated on or before May 31st of 2009. This program does not have a credit score requirement, and if approved, borrowers can lower their monthly payments, restructure and shorten the terms of their mortgage, and lock in lower interest rates.

Seek a Cosigner

It can be challenging to obtain, but if you are able to secure a cosigner with better credit for refinancing your home loan, this can help you achieve a better option. You have to be careful when using this option, however, since your cosigner will become equally financially responsible and will be affected just as you would if something goes wrong with the loan.

Streamline Your FHA Loan

If your mortgage is an FHA (federal housing administration) loan, you may be able to take advantage of the FHA Streamline Refinance Program. You can only apply for this loan if you are current with your payments on your FHA loan; however, this method of refinancing does not typically require a credit check. This is because FHA sees your initial approval with them for your loan as your qualification.

Refinance Your VA Loan

If your home is mortgaged through a VA loan, you can potentially refinance through the VA’s IRRRL (interest rate reduction refinancing loan) program. This refinancing option will not typically require a credit check and can vary depending on the private lender handling the loan and what state you are in.

Do Not Refinance if You Plan on Selling Soon

If you plan on selling your home soon, it’s advisable that you not try to refinance your mortgage; refinancing before taking on a new loan for a new home may make it more difficult to find a lender. Doing so may also potentially mark your credit history further if you take these two actions back-to-back. When selling your home is in the near future, opt instead to wait on any mortgage changes if possible and continue making payments on time, then you can shop for a new mortgage that will better suit your budget and financial needs.