July 30, 2025
9 minutes
Refinancing your mortgage with bad credit might feel like a long shot, but it’s more doable than most people think. Whether life threw you curveballs or your credit has taken a hit over time, you're not locked out of better terms forever.
In this guide, we’ll walk through every option available to you as a borrower with less-than-perfect credit, break down myths, and help you confidently move forward with smart, compliant strategies that could save you money.
Even with poor credit, you still have options. From low-credit refinance programs to equity-based solutions, the key is knowing where to look and who to trust. Let’s sort through the noise and help you make a move that’s right for you.
Key Takeaways:
- Yes, refinancing with bad credit is possible, but strategy is key.
- FHA and other alternative programs may help if you don’t qualify conventionally.
- Credit score, home equity, and debt-to-income ratio are crucial factors.
- Comparison shopping and non-commission platforms can save thousands.
- Avoid scams and misleading offers by understanding your refinance rights.
Can You Refinance with Bad Credit?
Short answer: Yes.
Here’s how lenders typically view credit scores:
- 720+ – Excellent
- 660–719 – Good
- 620–659 – Fair
- Below 620 – Poor
If your score falls below 620, most conventional lenders may say “no”, but that’s not the end of the road.
Get Pre-Qualified and Save Up to 1.5% at Closing with reAlpha
Save up to 1.5% at closing when you combine real estate and mortgage services with reAlpha.
Alternative Options:
- FHA Streamline Refinance – If your current loan is FHA-backed, this no-credit-check option can be ideal.
- Non-QM Lenders - These lenders specialize in borrowers outside the typical credit box.
- Home Equity Leverage – More equity = lower risk for lenders. Even with bad credit, 20 %+ equity boosts approval chances.
Pro Tip: Work with platforms like reAlpha that help buyers retain a significant portion of the agent’s commission, while also offering borrower-focused lending solutions through reAlpha Mortgage.
How to Prepare Before You Apply?
Before jumping into applications, prep is essential:
1. Check Your Credit Report:
Errors are common. Dispute mistakes via AnnualCreditReport.com.
2. Calculate Your DTI:
Debt-to-Income Ratio (DTI) helps lenders assess your ability to repay. Aim for under 43%.
3. Build Home Equity:
If possible, make extra payments to increase your equity; this can offset credit issues.
4. Gather Proof of Stability:
- Steady income
- Consistent payment history
- Savings or reserves
5. Compare Lenders (Carefully):
Not all lenders treat bad credit equally. Some charge excessive fees, while others offer full transparency. reAlpha Mortgage connects you to trusted lenders who specialize in helping credit-challenged borrowers refinance smarter.
What Types of Refinance Loans Work Best with Bad Credit?
FHA Streamline
No appraisal. No income verification. Ideal if your current loan is FHA.
VA IRRRL (For veterans only-not discussed here to maintain borrower inclusivity)
Non-QM Loans
Great for:
- Self-employed borrowers
- Recent credit events (e.g., bankruptcy, foreclosure)
Cash-Out Refinance
If you have significant equity and need cash, this might work, though credit will still impact terms.
Co-Signer or Co-Borrower Refinance
Adding someone with stronger credit can make a big difference.
Pitfalls to Avoid
- Trigger Terms without APR: Beware ads that flaunt "2.5% rates!" with no APR mentioned, non-compliant and misleading.
- High Fees: Some lenders prey on credit-challenged borrowers. Always ask for a Loan Estimate.
- Unverified Promises: No lender can guarantee approval-run from “too good to be true” offers.
Compliance Tip: Always verify NMLS numbers and contact details. reAlpha Mortgage is fully licensed, transparent, and borrower-first in every interaction.
What Are Lenders Really Looking For?
Even with poor credit, lenders weigh multiple factors:
- Loan-to-Value (LTV) ratio
- Employment history
- Savings reserves
- Current mortgage payment history
If you’ve never missed a mortgage payment, even with a low credit score, you’re already ahead of the game.
Conclusion: Yes, You Can Refi with Bad Credit - Here’s the Smartest Way
Buying a home is a big decision - and having the right information puts you ahead. But the real advantage comes from pairing smart research with a smarter way to buy.
When you use a reAlpha real estate company, you can be eligible to receive up to 1% of the home purchase price back as a credit at closing. Add reAlpha Mortgage, and that rebate can increase to up to 1.5% back, helping offset closing costs and keep more money in your pocket when it matters most.
The rebate is simple, transparent, and applied directly at closing - no complicated hoops, no delayed payouts. Just real savings tied to using a fully integrated homebuying experience.
See how much you could save:
- Check your eligibility
- Explore homes that fit your budget today.
- Your next move could come with thousands back at closing.
Estimate your savings → Rebate Calculator
Buying a Home? Get up to 1.5% Cash Back at Closing
Get pre-approval first, then start exploring homes knowing you can receive up to 1.5% of the home price back at closing.
FAQs
Can I refinance with a credit score under 600?
Yes, but options are limited. You’ll likely need to explore FHA or non-QM lenders.
Will refinancing hurt my credit score more?
A small temporary dip may happen due to a hard inquiry, but timely payments can improve your score long term.
How much equity do I need to refinance with bad credit?
Typically, 20% equity or more makes approval easier.
Can I add a co-signer to refinance?
Yes. A stronger co-borrower can offset your lower credit score.
Are there lenders who specialize in bad credit refinancing?
Yes. reAlpha Mortgage works with a vetted network of trusted lenders who specialize in helping credit-challenged borrowers refinance with confidence.
Compliance Disclosures:
- Mortgage rates and APRs mentioned are examples only and subject to change. Always obtain a current Loan Estimate.
- This blog does not constitute a loan offer or guarantee of credit.
- Licensing: reAlpha Mortgage is a licensed mortgage provider. NMLS details available upon request.
- All refinance scenarios are subject to lender approval, appraisal, and underwriting.
- This content is educational and does not replace personalized financial advice.
Get the latest market trends, homebuying tips, and insider updates—straight to your inbox. No fluff, just the good stuff.
Article by
Rocky Billore is a mortgage industry leader and Chief Sales Officer with over two decades of experience across residential and commercial lending. Since entering the industry in 2004, he has been directly involved in funding more than $1.4 billion in loans. A recognized expert in VA and government lending, Rocky combines deep program knowledge with a data driven, relationship-first leadership style. His work focuses on building scalable sales organizations, developing high performing teams, and aligning technology with real world lending outcomes to improve the homeownership experience.