My credit score is low, around 540. I owe about $51000.00 on my mortgage at 8%. Can I refinance at around 5% or lower with that credit score?
Answers | 3
From a traditional lending standpoint, FHA requires a minimum 580 credit score and Conventional (FNMA, Freddie Mac, etc.) is 620. But they are constantly changing these guidelines. My suggestion would be to get in touch with a credit repair company to assist in getting you up to at least the 580.
In a word, No. Historically, 8% is not a bad rate. Save the money it would cost to refinance and add additional monies, directed to the principal balance every month, and this will save you far more money than any refinance, if you do it consistently every month. Use your tax refund to make an extra payment or more every year, for the most significant savings. This will shave YEARS off of your mortgage and save you thousands in interest. Interest can only be charged on the outstanding balance. Good Luck!
The prior answers are correct that your current scores are too low to obtain a mortgage from almost all sources other than hard money lenders. The good news is that your loan size is relatively small, which makes the rate easier to live with. If you can boost your scores to 580+, you will at least have the option to pursue an FHA loan. If you're not currently paying mortgage insurance, however, some of the savings will be offset by the cost of FHA's mortgage insurance premiums (both upfront and monthly premiums apply)