New Mortgage Refinancing Program for Low Income Homeowners Opens

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Fannie Mae’s new mortgage refinancing program, targeting low- and middle-income borrowers, opened to applicants on June 5.

With mortgage rates still hovering near record lows, now is a great time for homeowners to consider a refi. However, many lenders introduced tough lending standards, which meant that some low- and middle-income homeowners were prevented from saving by refinancing at a lower rate.

With this in mind, the Federal Housing Finance Agency (FHFA) in April announced a new refinancing option for low-income borrowers with mortgages owned by Fannie Mae and Freddie Mac. A version of Freddie Mac’s program called Refi Possible will be launched on August 30th. FHFA estimates that borrowers who take advantage of the new refinancing opportunity could save between $ 100 and $ 250 per 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,” FHFA director Marc Calabria said in a statement. “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.”

The new refinancing option requires that the refinancing results in a monthly savings of at least $ 50, and the borrower’s interest rate is reduced by at least 50 basis points. For properties that are not eligible for appraisal waiver, the program also offers a $ 500 loan to pay appraisal fees.

The program also allows borrowers with balances under $ 300,000 to receive the unfavorable market refinancing fee introduced by Fannie and Freddie last year.

The new program helps distribute refi savings that have benefited mostly financially stable homeowners.

“The most important thing most households can do to take advantage of low interest rates is homeowners refinancing their mortgages,” said Greg McBride, chief financial analyst at Bankrate. “Significant reductions in monthly payments can create a way to speed up debt payments or respite to increase savings.”

This refi program has very specific requirements for participants. To qualify, you must:

Get a Fannie-secured mortgage on a single family property. Investment properties and second homes are not eligible. (Freddie Mac is expected to launch a similar program this summer.)

Earn 80 percent or less of the median income in your area. In Miami, the income limit for this program is about $ 55,000.

Have not missed payments in the last six months. Borrowers can have no more than one overdue payment in the last year.

Have a loan-to-value ratio of 97 percent or less, a debt-to-income ratio of 65 percent or less, and an FICO score of 620 or higher.

Borrowers should contact their lenders for more information. Not all lenders will participate in the program, so check with different lenders. Homeowners can check if they have a qualifying loan by using the Fannie Mae Loan Finder at knowyouroptions.com/loanlookup.



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