Mortgage  Question?
Mortgage refinance options low credit score high equity

I have significant equity in my home but poor credit due to high medical bills. What are my options for refinancing my mortgage?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Because you have significant equity in your home, your ability to refinance your mortgage depends on your monthly income and debt as well as your credit score. In order to qualify for a mortgage you must meet the lender's debt-to-income ratio and credit score requirements as well as other mortgage qualification guidelines. Despite your imperfect credit, there may be some refinance options available to you.

Debt-to-income ratio is the ratio of your total monthly debt payments such as your mortgage, property tax, homeowners insurance, credit card and medical bills to your monthly gross income. Most mortgage programs permit a debt-to-income ratio of 43% which means you can spend 43% of your gross income on your total monthly housing expense plus other debt. We provide a comprehensive overview of the debt-to-income ratio for a mortgage on FREEandCLEAR.

In your case, you may be able to improve your debt-to-income ratio through a debt consolidation refinance. With a debt consolidation refinance you take cash out of your home when you refinance and use the proceeds to pay off monthly debt (such as your medical bills) which lowers your overall monthly debt expense and improves your financial situation. By potentially reducing your total monthly debt expense, a debt consolidation refinance can boost your debt-to-income ratio and improve your ability to qualify for a mortgage. You can use our Debt Consolidation Refinance Calculator to evaluate different refinance and debt pay-off scenarios.

The second factor that lenders focus on in determining your ability to qualify for a refinance is your credit score. It sounds like you may have experienced some credit challenges so it is important to know what your credit score is before speaking with lenders. We provide a detailed explanation of your credit score and the mortgage process on FREEandCLEAR and you can review your credit report for free on websites like, or

Even if your credit score is relatively low you may still be able to qualify for a refinance. Depending on your credit score and other factors, lenders may offer conventional refinance programs for credit-challenged borrowers. Additionally, the FHA mortgage program requires a minimum credit score of only 580 and allows you to take cash out when you refinance. The interest rate on an FHA loan is usually lower than the rate on a conventional loan although borrowers are required to pay an extra upfront and ongoing mortgage insurance premium (MIP). Although you currently have a conventional loan you can still use the FHA program to refinance your existing loan.

After reviewing the resources on FREEandCLEAR we recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review lenders in your area by clicking INTEREST RATES We advise you to contact at least four lenders as refinance qualification guidelines vary. Be sure to ask about a debt consolidation refinance and cash-out FHA refinance when you speak with lenders.

Finally, if you are unable to refinance your mortgage through traditional a lender and mortgage program, you could consider a mortgage refinance assistance program. These programs are usually designed for borrowers who have little or no equity in their homes or who are struggling to make their mortgage payment so they may not directly apply to your situation, but they may still be helpful. We provide a comprehensive overview of refinance assistance programs on FREEandCLEAR.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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