Can You Refinance a Mortgage With Bad Credit? 2026 Options to Consider

A low credit score can make refinancing harder, but it does not always make it impossible. Your options depend on several factors: your current loan type, payment history, income, debt-to-income ratio, home equity, and the lender’s own requirements.

If your score is below 620, or even below 580, the best next step is not to assume you are disqualified. Instead, you should understand which refinance programs may still be available, what each program requires, and whether refinancing would actually save you money after closing costs.

Why Your Credit Score Is Not the Whole Story

Your credit score is important, but lenders usually look at the full picture. They may review your mortgage payment history, income stability, total monthly debts, home equity, loan-to-value ratio, cash reserves, and the reason your credit score dropped.

For example, a homeowner with a lower credit score but a strong mortgage payment history may be viewed differently from someone with recent missed mortgage payments. Likewise, a borrower with more equity may have more options than a borrower who owes almost as much as the home is worth.

This is why two borrowers with the same credit score can receive very different refinance answers. The score matters, but it is only one part of the underwriting decision.

Refinance Options That May Be Available With Lower Credit

The right option depends on the mortgage you already have and what you are trying to accomplish. Some homeowners want a lower monthly payment. Others want to remove mortgage insurance, switch from an adjustable-rate mortgage to a fixed-rate mortgage, shorten the loan term, or access home equity through a cash-out refinance.

1. FHA Streamline Refinance

If you already have an FHA-insured mortgage, an FHA Streamline Refinance may be one of the first options to check.

HUD explains that the mortgage being refinanced must already be FHA-insured, the loan must be current, and the refinance must provide a net tangible benefit to the borrower. FHA Streamline refinances are designed to reduce documentation compared with a full refinance, but “streamline” does not mean there are no costs or no requirements.

This option may be helpful if:

• You already have an FHA loan.
• Your mortgage is current.
• You want to lower your rate or payment.
• You are not trying to take significant cash out.

One important limitation: FHA Streamline refinances generally do not allow meaningful cash-out. If your goal is to pull money from your home equity, you may need a different refinance type.

2. Fannie Mae RefiNow

Fannie Mae RefiNow is designed to help certain lower- and moderate-income homeowners refinance into a more affordable mortgage.

According to Fannie Mae, RefiNow may allow a debt-to-income ratio up to 65% and no minimum credit score requirement at the program level. The program is also focused on creating a borrower benefit, such as a reduced interest rate and lower monthly payment.

However, this does not mean everyone qualifies. The loan generally needs to be owned by Fannie Mae, and borrowers must meet program rules related to income, payment history, loan-to-value ratio, occupancy, and other underwriting requirements.

This option may be worth checking if:

• Your current mortgage is owned by Fannie Mae.
• You meet the income eligibility rules.
• You have a reasonably strong recent mortgage payment history.
• The refinance would reduce your monthly payment or interest rate.

3. Freddie Mac Refi Possible

Freddie Mac Refi Possible is another refinance option designed to help eligible lower-income borrowers reduce monthly mortgage expenses and improve housing stability.

Like RefiNow, this program can be more flexible than a standard refinance, but it is still not automatic approval. The mortgage generally needs to be owned by Freddie Mac, and borrowers must meet specific income, payment history, debt-to-income, loan-to-value, and underwriting requirements.

This option may be worth checking if:

• Your current mortgage is owned by Freddie Mac.
• You meet the income eligibility requirements.
• Your goal is a lower payment or more sustainable loan.
• You can document your income and recent payment history.

4. VA Refinance Options

If you are an eligible veteran, service member, or surviving spouse, a VA refinance may be worth exploring. VA loans can be flexible because they are backed by the Department of Veterans Affairs.

VA guidance says VA itself does not require a minimum credit score, but lenders may set their own credit score limits. That means one lender may say no while another lender may still be willing to review your file.

Depending on your situation, you may hear about:

• VA Interest Rate Reduction Refinance Loan, also called VA IRRRL: Often used by existing VA borrowers who want to lower the rate or payment.
• VA cash-out refinance: May allow eligible borrowers to refinance and access home equity, subject to underwriting and lender requirements.

This option may be worth checking if:

• You are eligible for VA loan benefits.
• You already have a VA loan and want a simpler refinance path.
• You want to compare VA options against FHA or conventional refinance options.

5. USDA Refinance Options

USDA loans are designed for eligible rural and suburban borrowers who meet income and property requirements. USDA says its Single Family Housing Guaranteed Loan Program has no set credit score requirement, but borrowers must show willingness and ability to manage debt. Lenders may still apply their own credit overlays.

If you already have a USDA loan, ask a lender about USDA refinance options, including streamlined or streamlined-assist refinance programs if available for your situation.

This option may be worth checking if:

• You already have a USDA loan.
• Your property and income still meet USDA requirements.
• You want a lower payment and are not trying to take cash out.

6. Conventional Refinance With a Co-Borrower

If your credit score is too low to qualify on your own, adding a qualified co-borrower may help in some situations. This could be a spouse, partner, or family member whose income and credit profile strengthen the application.

However, this is a serious financial decision. A co-borrower may become legally responsible for the loan. Before adding anyone to a mortgage, both parties should understand the risks, obligations, ownership implications, and long-term consequences.

Quick Comparison of Low-Credit Refinance Options

Which Refinance Path Should You Check First?

If you are not sure where to start, use your current loan type as the first filter.

1. If you already have an FHA loan: Ask about FHA Streamline Refinance first.
2. If your loan is owned by Fannie Mae: Ask whether RefiNow may apply.
3. If your loan is owned by Freddie Mac: Ask whether Refi Possible may apply.
4. If you are VA-eligible: Compare VA refinance options, especially if you already have a VA loan.
5. If you have a USDA loan: Ask about USDA refinance options.
6. If none of these fit: Ask a lender to compare FHA, conventional, and other refinance options based on your current score, equity, and income.

When Refinancing With Bad Credit May Not Be Worth It

Even if you can refinance, that does not always mean you should. A refinance can come with closing costs, a longer repayment timeline, new mortgage insurance, or a higher total interest cost over the life of the loan.

Be especially careful if:

• The new rate is not much lower than your current rate.
• The closing costs are high compared with the monthly savings.
• You plan to sell the home before reaching the break-even point.
• You are restarting a 30-year term after already paying your mortgage for many years.
• You are using a cash-out refinance to pay off debt but have not fixed the spending pattern that created the debt.

A lower monthly payment can feel helpful, but the better question is: Will this refinance improve your financial position over the time you expect to keep the home?

How to Improve Your Approval Chances Before Applying

If your credit score is low, a few focused steps may improve your refinance options before you apply.

• Check your credit reports for errors. Dispute inaccurate late payments, balances, or accounts that do not belong to you.
• Pay down high-balance revolving debt. Lower credit card utilization may help your score and debt-to-income profile.
• Avoid new credit applications. New inquiries and new monthly payments can make approval harder.
• Stay current on your mortgage. Recent mortgage payment history can be especially important for refinance programs.
• Gather income documents early. Pay stubs, W-2s, tax returns, bank statements, and explanation letters can help the lender evaluate your file faster.
• Compare multiple lenders. One lender’s overlay may be stricter than another’s.

The Emotional Side of Refinancing With Credit Challenges

Trying to refinance after credit problems can feel discouraging. You may worry about rejection, paperwork, or being judged for past financial mistakes. That stress is real, but it should not stop you from getting clear information.

The most empowering step is to move from guessing to comparing. Once you know your current loan, estimated home value, credit range, monthly debts, and available refinance paths, the decision becomes less emotional and more practical.

Frequently Asked Questions

Can I refinance my mortgage with a credit score under 620?

Possibly. Some refinance options may be available below 620, especially if you already have an FHA, VA, USDA, Fannie Mae, or Freddie Mac loan that fits a specific program. However, individual lenders may still apply their own minimum score requirements.

Can I refinance with a credit score under 580?

It may be more difficult, but it is not always impossible. Your options will depend on your current loan type, equity, payment history, income, and lender requirements. Existing FHA borrowers may want to ask about FHA Streamline options, while VA or USDA borrowers should ask lenders familiar with those programs.

Does refinancing hurt your credit?

A refinance application can create a hard credit inquiry, which may temporarily affect your score. If you open a new loan, your credit profile may also change. However, making on-time payments on the new mortgage can support your credit over time.

Can I get cash out with bad credit?

Cash-out refinancing usually has stricter requirements than a rate-and-term refinance because the lender is increasing the loan balance and risk. Some borrowers with lower credit may still qualify, but the rate, fees, loan-to-value limits, and lender overlays may be less favorable.

What if my refinance application is denied?

Ask the lender for the specific reasons. Common issues include credit score, recent late payments, high debt-to-income ratio, limited equity, unstable income, or property valuation problems. Once you know the reason, you can decide whether to improve your profile, try a different lender, or wait.

Final Thoughts

Refinancing with a low credit score is not guaranteed, but it may be possible. The key is to match your situation to the right refinance path and then compare the true cost and benefit of the new loan.

Start by identifying your current loan type, checking whether your mortgage is owned by Fannie Mae or Freddie Mac, reviewing your recent mortgage payment history, and estimating your home equity. Then compare refinance scenarios carefully before you apply.

If the numbers work, a refinance may help lower your monthly payment, improve cash flow, or create a more stable loan structure. If the numbers do not work yet, you can still use the information to build a plan for improving your credit, reducing debt, and applying later from a stronger position.

Have questions about refinance scenarios? Use our Refinance Analyzer to compare your current loan with a potential new loan, or reach out through our contact page.