2 Million Homeowners May Be Eligible For New Mortgage Return Program

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Low-income homeowners can benefit from a new refinancing program launched by the US government.

Eligible borrowers will be able to refinance their mortgages at a reduced interest rate and lower monthly payment starting this summer. The Federal Housing Finance Agency, which oversees mortgage sponsors Fannie Mae and Freddie Mac, estimates that this would save them between $ 100 and $ 250 a month.

“There was a surge in refinancing last year, but more than 2 million low-income families did not take advantage of record-low mortgage rates through refinancing,” said agency director Mark Calabria.

“This new refinancing option is designed to help eligible borrowers who have not refinanced yet save between $ 1,200 and $ 3,000 per year on mortgage payments,” Calabria said.

When mortgage rates hit an all-time low in 2020, refinancing volumes reached approximately $ 2.6 trillion in a year, according to Freddie Mac. This is the highest annual rate since 2003, when $ 3.9 trillion in refinancing was recorded.

According to the website Zillow, the average rate on a fixed mortgage for 30 years is 2.95%. For a 15-year loan, the average rate is 2.13%.

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To be eligible for the new refinancing program, borrowers must have a mortgage secured by Fannie or Freddie for their home in which they must live and have an income of at least 80% of the median income in their area. They also had to not miss a single payment in the previous six months and no more than one in the previous 12 months.

Also, their mortgage cannot have a loan-to-value ratio above 97% and they must have a debt-to-income ratio below 65% or a FICO credit rating of at least 620.

In the meantime, lenders would have to cut the borrower’s monthly mortgage payment by at least $ 50 and cut the interest rate by 50 basis points (half a percentage point).

Lenders – who will have the opportunity to participate in the program – you will also need to abandon the current unfavorable market refinancing fee for borrowers whose loan balance is not more than USD 300,000. And if the borrower is not eligible for an appraisal waiver, the lender must provide a loan of up to $ 500.

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