The federal government is set to start offering more mortgage refinancing options for low-income borrowers starting June 5, 2021.
Federal Housing Finance Agency (FHFA), the mortgage finance regulator, announced earlier this year that in order to better serve those affected by the COVID-19 pandemic and the economic downturn, it will start offering new mortgage refinancing an option for low-income borrowers who hold loans backed by Fannie Mae and Freddie Mac, state-controlled mortgage giants that provide about half of all US mortgage loans. FHFA estimates that this refinancing option can save borrowers $ 100 to $ 250 on their monthly payments.
Borrowers who are interested in whether they are eligible for this refinancing option and benefit from today’s low interest rates you can use an online marketplace like Credible to get in touch with a mortgage expert and get all your questions answered.
Who is eligible for FHFA’s new mortgage refinancing program?
According to the FHFA, eligible homeowners can refinance their home loan and lower interest rates as well as their monthly payments by an average of about $ 100-250 per month. But the regulator requires lenders to save borrowers at least $ 50 per month in order to use the refinancing program.
Lenders using this program must also advance appraiser costs of up to $ 500 if the property is not eligible for refinancing without a traditional appraisal. Fannie Mae and Freddie Mae will later reimburse the mortgage lender for the appraisal costs.
With refinancing rates at an all-time low, many borrowers who were previously not eligible to refinance mortgages can now do so. This program weakens the standards for obtaining refinancing. Below are some of the standards for low-income borrowers who can get refinanced under the new program.
- Higher debt-to-income ratio (DTI): The low income refinancing option allows DTI 65%, which is higher than the traditional DTI level for conventional loans of 43%. This means that the total amount of debt, including home loan payments, personal loans, student loans, credit card payments, car loans and other loan balances and debts, cannot exceed 65% of her total income. ” are down, and if we cut their payments, their DTI will go down, so this will be a self-fulfilling prophecy, ”said Vishal Garg, CEO and founder of Better.com, a mortgage lender that will offer the new refinancing product.
- Low income standards: This low income loan refinancing product is only available to low income borrowers. Thus, the homeowner must have an income of at least 80% of the local average income.
- Missed payments: Unlike traditional mortgage refinancing, a borrower may have one missed payment in their 12 month history. However, their six-month history must include all timely payments.
- Other requirements: The homeowner must also have at least 3% of the shares in the home, and his credit rating can be as little as 620 points.
“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 FHFA director Mark Calabria. said when the program was announced… “This new refinancing option is designed to help eligible borrowers who have not yet refinanced save between $ 1,200 and $ 3,000 per year on mortgage payments.”
If you are ready to refinance and want to find out if you are eligible for it, or compare rates and see how much you could save, visit Credible to access multiple mortgage lenders at the same time…
How long will the refinancing program last?
There is no end date for the refinancing product, however, homeowners may have much less time to refinance their mortgage. This is because as refinancing rates rise, the benefits of refinancing fall.
“This is partly happening quickly because interest rates continue to rise,” Garg said. “Markets may turn this off if rates continue to rise.”
According to Garg’s estimates, the average loan amount for such refinancing can fluctuate around $ 150,000. For that amount, even a simple one percent increase in mortgage interest rates can result in an increase in monthly payments of nearly $ 100. Waiting homeowners run the risk of missing out on low interest rates.
Garg said the program could help hundreds of thousands, if not millions, of families refinance their home loans.
Want to know how much you can save? Visit the Credible online marketplace and use the mortgage refinancing calculator to calculate your potential savings.
Low-income borrowers were left out of the refinancing surge last year as their income and credit history prevented them from benefiting from record low mortgage rates. But now, FHFA’s new refinancing program could help thousands save even more on mortgages.
To learn more about the program and today’s refinancing options, visit Credible…
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