If you have bad credit, you probably know how stressful it can be; it severely limits your options when it comes to making big life decisions and can stagnate life’s financial necessities including, but not limited to:
- Accessing quality lines of credit
- Acquiring student loans
- Acquiring home and auto loans
- Qualifying for apartment rentals
- Accessing credit cards
- Refinancing loans
Refinancing your home can lend opportunity for some quick financial wins. It allows you to leverage the equity in your home, it can shorten your loan payment period, and even grant access to lower monthly payments through better interest rates. This may sound all well and good, but there is a caveat — refinancing your home in a beneficial way requires a good credit rating. But don’t fret — there are some options to refinance with bad credit.
But first, it’s important to know what home refinancing is and how it works.
What is Home Refinancing and How Does it Work?
Home refinancing, also referred to as mortgage refinancing, is a way of replacing your current home loan with a new one that carries lower interest rates, more convenient loan terms, and other miscellaneous benefits.
Essentially, your new mortgage is used to pay off your existing mortgage, so you are left with one, newer mortgage to pay down each month.
Common Reasons to Refinance Your Mortgage
- Renegotiate mortgage payment terms
- Acquire lower loan interest rate
- Cash in on home equity value
- Save thousands in long-term interest payments
- Lower monthly mortgage payments
- Erase debt on current mortgage
- Remove somebody from the mortgage (common after a divorce)
When refinancing your home, the process is pretty much identical to the normal mortgage application process. The only difference is that your new loan goes toward paying off your current mortgage, instead of your home. In some instances, you may be able to borrow more than what you currently owe on your home and pocket the difference as cash. However, this whole process generally will require a good credit score. But even for those with bad credit, there are some options to refinance.
Options For Refinancing With Bad Credit
- Check if you qualify for a VA IRRRL: A VA IRRRL is an interest rate reduction refinance loan from Veterans Affairs. In order to qualify for it, you need to have a VA-backed loan, you need to intend to use the IRRRL to refinance your existing VA-backed loan, and you need to certify that you currently live in the home from your current VA-backed loan.
- FHA Streamline Refinance: “Streamline refinance” refers to the amount of documentation and underwriting required. Essentially, this means that you can refinance without a credit check or income verification. However, the qualifications are relatively stringent. To qualify, you need to currently have an FHA-insured mortgage, the current mortgage cannot be delinquent, and you may not take more than $500 out on mortgages using the streamline process.
- Find a Co-Signer: This can be easier said than done, but if you find someone else with good credit to cosign on your loan, you will have a better chance of accessing quality refinance loans. This essentially means that both you and the co-signer are on the hook for paying off the loan; so there is some inherent risk for the other person as well if you become unable to pay down your debts.
- Home Buyback Program: Home buyback programs are gaining traction all around the US. It’s an innovative way to access your home’s equity without having to deal with traditional lenders who put their own interests before yours. It’s a low-risk option for those dealing with financial hardship without being bogged down by long-term loan payments. SKYDAN Equity Partners offers this option.
Your Solution to Home Refinance: When Traditional Lenders Say No, We Say Yes
SKYDAN’s home buyback program is designed to help struggling homeowners by giving them a large lump sum of cash, with which they pay down their debt — property taxes, mortgage payments, medical debt, college, or anything else — BEFORE you default on your loans. This means that if you’re struggling to refinance your mortgage, we’ll help you bypass the process entirely. We don’t care about your credit score, employment status, or current income. All you need to qualify is enough equity in your home.
Here’s how it works:
We buy your home and in return give you a large sum of cash. You then lease the home back from us for up to 24 months with deferred rent payments. This means that while you’re leasing your home back from us, there are no monthly payments, no interest paid, and no added debt.
At the end of the 24-month period, you have two options:
- Purchase the home back (original price + deferred rent)
OR - Sell the property, keeping all additional equity
We don’t care about your credit score, employment history or debt-to-income ratio. We are here to help you break the cycle of debt, not add to it like traditional lenders do.