Bad credit mortgage refinancing has a few more guidelines than it used to, but is still easier to find than you may think. (Unnamed Copywriting)

Bad credit mortgage refinancing has a few more guidelines than it used to, but is still easier to find than you may think.

In the past year, there have been drastic changes the process for approving home loans. A large part of the market for bad credit loans has simply disappeared, and the lenders that are left have tightened their guidelines. But, despite what a lot of people are thinking and a lot have heard, refinancing mortgage with bad credit is not impossible.

It is well known throughout the industry that getting someone with bad credit approved for a mortgage refinance is much harder than it has been in a very long time. Sub-prime and non-conventional loans are completely gone. There used to be a bank somewhere out there that would finance any of your borrowers, as long as you looked hard enough. But, these were the banks that were hit the absolute hardest by the mortgage crisis, and thus were the first to drop out of business.

The FHA program used to have no credit score requirements at all. As long as a borrower had less than 2 instances of being more than thirty days late on their mortgage payment within the last twelve months, there was a very good likelihood that you could get them approved. There was even an FHA program for borrowers who had more than the requisite 2 thirty day late payments within the last year, called the FHA secure program that allowed for people with adjustable rate mortgages to refinance regardless of how many lates they had.

The mortgage rates were very different for all of these different loans, and in a lot of instances, the bad credit loans actually had terribly high interest rates that were adjustable rates to boot. But, the fact still remained that these borrowers were easily able to get approved.

But, first we saw the fall of the sub-prime lending world. There simply are not any of these banks that are still offering those loans. Next came the fall of the FHA Secure program. And, finally, banks started instituting minimum credit scores in order to qualify for any FHA program at all. At first it was a 500 credit score minimum, and it quickly rose to 540, then 580, then 620, and now 640 for most banks. This has caused most people to just assume that there are no more options for bad credit loans on a home mortgage.

What people don’t understand is that these minimum scores were not implemented by the Department of Housing and Urban Development itself, but by each of the individual banks that were offering FHA loans. In fact, the FHA program itself still has no credit score requirement. The banks simply put a limit to what they found was a comfortable credit score number to lend to. Despite this, there are still plenty of banks that will offer FHA mortgage refinancing with a credit score as low as 530.

While most of the bad credit lending world has dried up, there are still options. Finding a good mortgage lender that is offering FHA loans can still lead you to a much better fixed mortgage rate.