Refinancing your mortgage can be one of the smartest financial moves you make—especially if it helps you lower your interest rate, reduce monthly payments, or access home equity. Even if your credit isn’t perfect, refinancing is still possible with the right guidance and strategy. But what if your credit isn’t perfect? The truth is, having bad credit doesn’t automatically disqualify you. With the right approach, knowledge, and support from an experienced mortgage broker, refinancing is still possible.
Below, we’ll walk through what refinancing involves, the programs available for borrowers with low credit, and practical ways to improve your approval odds.
If you need to refinance your mortgage, it can be harder than you think—especially if you’ve got bad credit. Even with an average credit score, you might be tempted to believe that refinancing isn’t an option for lowering your monthly mortgage payment. However, a low credit score doesn’t mean you’ll be automatically denied.
Immediately below, we’ll share how to refinance a mortgage with bad credit. There are several choices available for refinancing, and we’ll talk about which one may fit your situation best.
There are many reasons homeowners consider refinancing their mortgage. For some, it’s about lowering their interest rate to make monthly payments more affordable. For others, it’s about switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more stability.
You might also refinance to:
Refinancing is a significant financial decision—it involves closing costs, an appraisal, and possibly a title search. Before moving forward, it’s wise to talk with a Mares Mortgage loan expert, who can evaluate your current situation and help determine whether refinancing truly benefits your long-term financial goals.
It's an important decision as to whether you should refinance, since doing so requires a title search, application fees, and an appraisal. If you’re considering refinancing your mortgage, we recommend speaking with a Mares Mortgage team member who can address any questions you might have.
Refinancing simply means replacing your current mortgage with a new one—ideally with better terms. The process is similar to applying for your first mortgage, but this time, you already have a payment history and home equity on your side.
Here’s what you’ll generally need to do:
Some programs, such as FHA Streamline or VA IRRRL refinancing, require less paperwork and documentation—making them great options for borrowers with lower credit scores.
Related: Recast a Mortgage: A Complete Guide
Are you confused about how refinancing works? One of our team members here at Mares Mortgage can help clarify everything for you.
Refinancing with bad credit is more common than you might think. The key is knowing which programs are designed for borrowers like you and how to strengthen your application.
Start by contacting your current lender to ask about refinance options—they may already have flexible programs for loyal borrowers. If not, a mortgage broker can help you compare other lenders that specialize in bad credit refinance loans.
If your credit score is very low, a lender may recommend adding a co-signer—someone with stronger credit—to improve your chances of approval and possibly secure a better rate. Remember, the interest rate offered will usually be based on the lowest credit score between both applicants.
However, obtaining a cosigner might be the difference between securing approval and denial.
If you’re a military veteran, active-duty service member, or eligible surviving spouse, you may qualify for VA-backed refinancing options. These loans often have more lenient credit requirements and no private mortgage insurance (PMI).
If you want to make your monthly mortgage payments smaller or more stable, an interest rate reduction refinance loan (IRRRL) might be the right option. For this choice, you must have an existing loan backed by the U.S. Department of Veterans Affairs (VA).
This option allows veterans to borrow up to 90% of their home’s value. Essentially, the VA Cash-Out Refinance loan allows you to replace the loan you already have with one that has different terms. The same VA guidelines apply in terms of credit, and the cash out can be used to prop up a declining savings account, stockpile cash, or pay off debt.
Even if you didn’t use VA benefits to buy your current home, you can use them now to refinance an existing conventional or FHA loan. There’s no strict minimum credit score requirement, making this one of the most accessible refinance options for veterans.
The Federal Housing Administration (FHA) offers another great option for homeowners with less-than-perfect credit. These loans are insured by the government, giving lenders more flexibility and borrowers better approval odds.
FHA loans are usually restricted to those who intend to use the house they buy as their primary residence. That means FHA loans can’t be used to finance a rental home, a vacation home, an investment property, or a second home.
If your house becomes an investment property, the interest rates could drop, and you may want a better deal through refinancing.
If you already have an FHA-backed mortgage, you may qualify for a “streamline” refinance—one of the simplest ways to lower your rate. You must have made on-time payments for the past year and held your current loan for at least 210 days. Best of all, there’s no appraisal or income verification required in many cases
Talk to a Mares Mortgage professional for more details.
Want to access your home’s equity? This option lets you borrow more than your existing loan balance and receive the difference in cash. Just note that FHA limits apply depending on your county. With this option, you can take out more than you currently owe and keep the difference—but only within the FHA loan limits for your region.
If your credit score is between 580 and 620, this program could help you refinance into better terms—even if you’ve faced financial challenges in the past.
Tip: Mares Mortgage can guide you through every FHA option and help you determine which one fits your goals best.
If you don’t qualify for FHA or VA programs, alternative lenders—sometimes called non-prime or non-QM (non-qualified mortgage) lenders—may be your best option. These lenders evaluate applications differently, often considering your full financial picture instead of just your credit score.
Some non-QM lenders accept:
These programs can be more flexible but may have higher interest rates or fees, so be sure to review all terms carefully. There are a few options to consider, even if your foreclosure or bankruptcy was just completed. Alternative lenders, also known as “non-prime lenders,” don’t follow the same guidelines as government-backed programs.
Many of these lenders offer products through mortgage banks or brokers, but not all are available in every state.
Related: How to Get a Home Improvement Loan
Even small improvements in your credit score can help you secure better refinance terms. Here are some practical ways to raise your score quickly:
Rebuilding your score can take time, but most negative marks fall off your report after seven years. Following consistent financial habits can speed that process significantly.
Secured credit cards help you build credit, though they’re not a guaranteed fix. Some users see improvements within six months.
Keep credit utilization low—this is the second-highest factor in your credit score according to both FICO and Vantage.
Paying on time consistently is one of the fastest ways to improve your credit score.
Delinquent accounts can drag your score down. Get current to stop further damage.
Too many new accounts = hard inquiries + reduced average account age, which can hurt your score.
If you share accounts with someone who has bad credit, lenders may penalize you for the connection. Remove linked accounts to protect your score.
There’s no fixed timeline—it depends on your credit history and how severe the damage is. For many borrowers, meaningful improvement can happen in six to twelve months of consistent effort. A single late payment might take a few months to recover from, while multiple defaults could take a couple of years.
Bad credit doesn’t have to stand between you and better mortgage terms. With programs like FHA and VA refinancing—and help from an experienced mortgage broker—you can find a solution that fits your budget and goals.Before you commit, always compare options, review the fine print, and calculate total costs. At Mares Mortgage, our experts take the time to understand your situation and match you with the right refinancing strategy—no judgment, just honest guidance.
Related: How to Get a Veteran Home Loan
Thinking about refinancing? Talk to one of our team members at Mares Mortgage and let us walk you through your options.
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