When Does Refinancing Require a Credit Check?

December 27, 2019

You found a good realtor, your real estate purchase was approved, and you got the loan. But now you need to refinance, and you might need to refinance to get into a lower mortgage payment. For some borrowers, add some credit problems to the mix and you get a refinance loan situation that may be challenging for some to get loan approval in.

If you are looking for a bad credit refinance loan, or are worried that your current credit scores aren’t right for home loan approval, it’s logical that you might wonder if there is a refinance loan that has no credit check.

Some borrowers need a no-credit check refinance loan to get into a lower monthly payment they can better afford; others might be hoping to get out of a conventional loan, or even an adjustable rate mortgage by refinancing into an FHA mortgage.

When does refinancing your home loan require a credit check?

Cash Back = Credit Check

All transactions that result in cash back to the borrower, or loans that require cash disbursements to contractors, laborers, etc. will require a new credit check AND a new appraisal. The basic rule of thumb here is the cash involved.

If money is going to you or to people you need to hire to work on your home, you will need to work on your credit first.

That includes Reverse Mortgages and FHA Rehab refinance loans, but may not necessarily include some FHA-to-FHA refinance loans that offer extra funds for energy-saving improvements. Those transactions, known as FHA Energy Efficient Mortgages, would require a credit check only if the cash added increases the loan by a certain percentage.

FHA Streamline Refinance Loans

Most refinance loans will require a credit check. The exception is the FHA Streamline Refinance loan, used to refinance existing FHA mortgages only and with no cash back the borrower allowed. These loans must result in a lower payment or other benefits in most cases.

Streamline Refinance loans can help you transition out of an Adjustable Rate Mortgage, get a lower interest rate, etc.

Refinancing to End Loan Delinquency

The lender may or may not require a credit check if you are trying to refinance a mortgage to avoid foreclosure and catch up your payments. If you are experiencing a loan modification instead of a refinance loan, the terms and conditions may be different than for a refi loan. Ask your lender about the differences between the two and which course of action may be right for you.

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