If you have bad credit, but would like to take advantage of super low refinancing options right now, there are a few simple things you can do. If your house is at risk of foreclosure, or sold your home in a short sale recently, you will still have to wait at least 2 years before most creditors will begin talking to you, and maybe longer. But if you haven’t experienced such a blow or it is at least a few years in the past, here are some age-old, credit-friendly tactics that may help you secure a refinance.
Bad credit lenders
Federal Housing Authority lenders are authorized to work with borrowers with bad or no credit. Ask around, or do a web search for approved FHA lenders. If your credit score is more than 500, you may qualify for an FHA-approved loan.
Build up cash reserves
If you have bad credit, many lenders will approve a loan only on the condition you can make a large down payment. You will need to have the cash on hand to do this, and you will mostly likely be required to pay closing costs and pay to have your home re-appraised.
Reduce interest rate by ‘paying points’
Paying points is a strategy where you pay the lender to reduce your refinance rate by putting down more at closing. For instance, if you want to shave a percentage point off of your refinance rate, you may be required to put down another 1,000 or 2,000 dollars per point. There is a threshold for how far you can reduce your refinance rate with this method, so consult a loan officer to get more details on this option.