If your credit score dropped since you took out your mortgage, you probably think you don’t have any options for refinancing. Luckily, there are a couple of no credit check options you can use, depending on the type of mortgage you have now.
These options are strictly for rate/term refinances. You cannot take cash out of the home with these loans. But you also won’t have to verify your income or assets in addition to getting away without checking your credit score.
Keep reading to learn about these great programs.
FHA Streamline Loan is a No Credit Check Mortgage
Do you have an FHA loan now? If so, you are in luck. The FHA streamline loan allows you to refinance with no credit check. Just how does that happen? The FHA allows lenders to use the original qualifying factors for the FHA loan. There is one exception –you have to prove that you made your mortgage payments on time.
FHA lenders will look at your last 12 months of mortgage payments. If you made them all on time, you have a good chance of securing a new loan. If you have one late payment and it was not more than 30 days late, you may still be eligible for the loan. This will vary by lender, though. Some lenders aren’t willing to take the risk if you have any late payments.
There’s only one more requirement the FHA has – you must have a net tangible benefit. In other words, there must be a good reason to refinance. The FHA just wants to make sure that it makes sense for you to refinance. A net tangible benefit could be any of the following:
- Lower interest rate
- Lower monthly payment
- Refinance out of an ARM into a fixed rate loan
- Refinance into a shorter term
If you refinance your loan within the first 36 months of taking out your FHA loan, you may get a refund of a portion of your upfront MIP that you paid originally. The amount you receive depends on how much time has passed since your original FHA loan. The more time that you let pass, the lower the refund you will receive from the FHA.
VA Streamline Loan is a No Credit Check Mortgage
If you have a VA loan, the VA has a similar program as the FHA. You can refinance your outstanding principal balance plus closing costs and the VA funding fee. Again, you don’t need to go through a credit check and you also don’t need to verify your income or your home’s value. You could even be upside down on your loan and still get approved.
The VA also requires that you have proof of 12 monthly payments in the last year. Again, if you have one 30-day late payment, you may be able to get by with it. This will vary by lender. The VA requires that the late payment not be within the last 3 months, though. The last 3 months of your mortgage history must be timely in order to qualify.
The VA also requires that you have a net tangible benefit. Generally, they want to see that you will save money since that’s the premise of the program. As long as you can prove there is some type of benefit, though, VA lenders can usually get your loan approved. Keep in mind, with the VA loan, you will have to pay the funding fee again. This time around, it will only be 0.5% of your loan amount, though, rather than the 2.15% you paid when you bought the home.
If you have a VA or USDA loan, it’s easy to refinance with no credit check. Keep in mind, though, some lenders will still require that they check your credit. They want to know that you are a good risk. If you have something to hide on your credit report, you may want to shop around until you find a lender that sticks to the FHA and VA’s rules alone.