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Is it possible to refinance to lock in a low interest rate with bad credit?

My parent's current mortgage loan is a fixed 20yr loan at a 5.75 interest rate. Unfortunately times haven't been perfect and their credit isn't very good, but the mortgage is always paid even if it's a few days late. Im wondering if it would be possible to take advantage of the current interests rates with a little help. I too have had an early history of bad credit but have been able to save 35K, which I would gladly invest in our home to help lock in a much lower interest rate. Any advice is greatly appreciated. Below I will provide as much helpful info as I can.

Home value:
1. 530K-1.4M (Various estimating websites such as zillow.com & epraisal.com)
2. 697K (Tax assessed value)

Loan type and term: 20 Years Conventional

Original principal balance: $288,000.00 
Contractual remaining term: 10 years, 11 months
Interest rate: 5.75%

Current principal balance: $191,100.79

Total monthly payment: $2,573

Note: My parents rent the basement and 1st floor for a total of $2950 and my father will have a pension in the range of $3500.
  • June 21 2012 - Riverdale
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Answers (3)

Profile picture for Cruizer28
Thank you, Justin and Jonathan for your response. Justin, my parent's lender is Bank of America and although I can't be certain of their credit scores it can't be much higher than the 620, if that. Jonathan, I've never heard of a reverse mortgage but from what I have now researched it seems like an interesting alternative. I will talk to my parents and see what we can figure out. Thanks again.
  • June 26 2012
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Have they thought about a reverse mortgage? They would benefit from being able to use he equity for investing and not have to worry about credit score as t is. It a qualifying requirement for reverse mortgages.
  • June 24 2012
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If they loan is Fannie Mae owned there is a very good chance they would be approved both for Refi Plus and DU Refi Plus even with a low credit score. If the loan is Freddie Mac owned, Relief Refinance with the existing servicer would be an option (if servicer originates). If not the Freddie Open Access typically would need a 620 median FICO score. From the data you posted there is an excellent chance the loan fits an above category.
  • June 22 2012
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