RefiNow™ Allows More Homeowners To Lower Their Mortgage Payment
Kevin Graham4-minute read
June 19, 2021
A great way to better your financial situation is to reduce expenses. One of the biggest monthly costs most people have is their mortgage payment. Unfortunately, if you’re making enough income to make your mortgage payments, but not much more, you may previously have had a hard time qualifying to refinance and lower your rate.
Fannie Mae’s RefiNow™ 1 option allows lower-income borrowers to take advantage of today’s favorable interest rate environment to cut down their monthly payment. We’ll go over the benefits and what you need to know to qualify.
Maybe you had to do a lot of work to make the house your dream home or you really needed to replace your car. You worry that these unexpected loans pushed up your debt-to-income ratio (DTI) and made refinancing impossible. RefiNow™ allows clients with higher-than-normal DTIs a chance to qualify to refinance at today’s low rates.
Under a directive from the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac have expanded or will be expanding access to refinance options for clients who meet certain low-income thresholds. In addition to needing minimal equity to refinance, requirements around DTI have been loosened. However, the benefits extend further.
Homeowners who qualify under this program need to see at least a 0.5% reduction in their interest rate. Their overall mortgage payment also has to drop by at least $50. Moreover, the adverse market refinance fee of 0.5% of the loan amount applying to certain refi loans is being waived.
If an appraisal is required to place a value on your home, you’ll receive a $500 credit toward that appraisal. Additionally, there’s less paperwork required from your end. We can verify your income with a pay stub. If you’re self-employed, we may just need 1 year of your personal tax returns.
Qualifying For RefiNow™
In order to qualify for RefiNow™, you’ll need to meet several qualifications. Let’s run through the list so that you can know what to expect.
- Your existing loan must be from Fannie Mae. A version of this program for those currently in Freddie Mac-owned loans will be available later this summer. You can use Fannie Mae’s loan lookup tool to see if the agency owns your mortgage.
- You must make no more than 80% of the median income in your area. Feel free to check your local area median income limits.
- Your DTI must be 65% or less. This is up from the usual limit of between 43% – 50% for conventional loans.
- You need at least 3% existing equity in your home. The program is aimed at helping those who maybe haven’t been in their home long or haven’t seen property values rise.
- Your median FICO® Score must be 620 or higher. Lenders generally look at the middle score between Equifax®, Experian™ and TransUnion® to qualify you.
- You need a good payment history. To be eligible under this option, you’ll need no more than one 30-day late payment in the last year and none in the last 6 months.
- You must be refinancing a one-unit primary residence. Residences with more than one unit are ineligible under this loan option. However, condo projects, co-ops and planned unit developments don’t have to undergo the usual review process in the refi.
- Your loan must meet certain age requirements. You need to have been in your existing mortgage for at least a year, but no more than 10 years.
- You must use this to lower your rate and/or change your term. This loan option can’t be used to cash out equity.
There’s a lot there to go through. If you’re not sure whether this is the mortgage option for you, feel free to speak with one of our Home Loan Experts about your situation.
The Bottom Line
RefiNow™ opens up the ability to refinance to many who previously qualified for a mortgage with Fannie Mae but may have been unable to refinance and take advantage of lower rates previously due to having a DTI on the higher side. With a 65% DTI maximum, this option is intended to remove that barrier.
A huge benefit of this program is a guarantee to lower your interest rate by 0.5% and your monthly payment by at least $50 for those who qualify. The 0.5% adverse market refinance fee doesn’t apply to these loans, reducing costs. Finally, you can benefit from easier documentation requirements and a $500 credit if an appraisal is necessary.
In addition to meeting the previously mentioned DTI requirement, standard conventional credit score requirements apply. The other big factor specific to this program is that you can’t make more than 80% of the median income in your area. You also need at least 3% equity. This isn’t an option for those looking to take cash out of their home.
To look into this and any other mortgage options that may be available to you, you can apply online or give us a call at (833) 326-6018.
1 Freddie Mac and Fannie Mae have adopted a new refinance option for loans to borrowers with incomes at or below 80% of area median income and you may be eligible to take advantage of this program. If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under this refinance option.
You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites:
See What You Qualify For
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