Record-low interest rates are dominating the news cycle and homeowners, in particular, are jumping to refinance. Data from the Mortgage Bankers Association puts current refinance activity at 98% higher this year than last year, even amid a global pandemic.
Those with low credit shouldn’t skip rate shopping either as there are still options available in today’s low-rate environment — even for those with the thinnest credit profiles.
Mortgage rates vary by lender. Many non-traditional lenders take other factors into consideration outside of credit score, like earning potential and steady work history. While some of these lenders do advertise their qualification criteria, many borrowers may not happen upon them unless they actively shop for refinance rates and offers.
These days, borrowers can quickly explore their mortgage refinance options by visiting Credible, which allows loan seekers to compare both rates and lenders in one place.
1. Look at FHA loans
FHA loans aren’t just for first-time buyers with small down payments. The benefit to doing an FHA refinance is that this option, backed by the Federal Housing Administration, does consider borrowers with sub-600 credit scores who hold less than 20% equity in the home. In fact, only those with less than 20% are eligible for an FHA refinance.
There’s even better news for those with existing FHA loans. With the newer FHA Streamline Refinance product, borrowers can refinance without an appraisal and with lower out-of-pocket costs, saving both time and money.
2. Explore VA loans (if you qualify)
Veterans receive many benefits for their service to our country, and one of those is access to mortgage loans backed by the government via the Veterans Administration (VA). Not only are these loans offered at some of the lowest interest rates available, but they also benefit current and past service members regardless of their credit.
Those with current VA loans can also consider refinancing through the VA with the Interest Rate Reduction Refinance Loan program. The IRRRL program is similar to the FHA Streamline Refinance product in that it does not require hefty out-of-pocket closing costs or an appraisal.
If you're interested in finding the lowest interest rates around, however, you should consider using a multi-lender marketplace like Credible. Credible allows you to compare rates and lenders to ensure you find the best deal.
3. Opt for cash-out refinance
A cash-out refinance may make the most sense for those with low credit due to a large amount of high-interest debt. Leveraging a cash-out refinance turns home equity into a liquid asset, which borrowers can then use to pay off outstanding debts. Additionally, refinancing to a lower interest rate will save money on the repayment. With current credit card interest rates above 17%, and cash-out refinance rates at 3.194% APR for a 30-year fixed option, this refinance option makes financial sense for those battling to get out from under their debt.
You can visit Credible to get pre-qualified for such a loan and to shop around for loan options among different mortgage lenders. By providing some basic information, you can find out if approval for a loan is likely and can see what rate you'd pay so you can determine if a mortgage refinance loan is affordable.
What are today’s mortgage rates?
It’s important when shopping for a mortgage refinance to keep an eye on interest rate changes week to week as even a small increase adds up to thousands saved on interest. Again, Credible is a great place to shop. You can compare rates and complete the entire mortgage refinance application process online. Find your rate today.
As of the time of writing, (the week November 19th) the current interest rates are:
- 30-year fixed-rate refinance average: 2.75%.
In the month prior (Week of October 19th), the average 30-year fixed-rate refinance was much higher at 3.16%.
To illustrate the difference, let’s look at the numbers. A consumer refinances a $300,000 loan at 3.2% in October pays over $167,000 in lifetime interest. Another consumer who waits a month and refinances $300,000 at a slightly lower rate of 2.8% percent will pay just $143,000 in interest over the life of the loan.
The bottom line
Don’t let a bad credit score keep you away from the significant savings to be had with today’s low interest rates. While lower credit may not qualify you for the best rates available, depending on when you refinanced and your credit score at the time, refinancing now could still be a big financial win.
To start, investigate refinance options by shopping with multiple lenders to see potential rates, and then input those figures into a mortgage refinance calculator to visualize savings.
Finding the best mortgage refinance rates takes time. You'll need to compare rates from multiple lenders. Credible allows you to compare multiple lenders to ensure you meet your personal finance goals. Find out how much you could save on your loan amount by refinancing now.