Asked by JoAnne  |  Submitted October 18, 2015

Can I refinance with bad credit due to disability?

Approximately 2 years ago, I went on disability due to a brain injury. My income has decreased by approximately 1/2 since that time. As a result, bills were not paid when due, etc. My credit score dropped from mid to high 700s to mid-to high 500s. I want to refinance to pay off all existing debts and do some remodeling. Is this even possible?

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  Answers  |  1

October 19, 2015

Hi JoAnne. It sounds like you would be a great candidate for an FHA loan. They will allow down to a 550 credit score. Since you had an extenuating circumstance, they will just ask you to provide documentation regarding the disability. The big question will be how much will you qualify for based on your current income. The underwriter will look at your gross monthly income and multiply that by 41%. That represents the maximum debt you can qualify to carry including the new mortgage.

JoAnne | 10.31.15 @ 01:30

I want to pay off all debt other than the mortgage, which is approximately $60,000, not including the mortgage, and get cash to do remodeling. The current loan is approximately $269,000, and the value is approximately $350,000. The homes in our neighborhood that have been upgraded are selling for between $400,000-$550,000.

$commenter.renderDisplayableName() | 09.30.20 @ 21:50