What is RefiNow? | Fannie Mae’s low-income refinance program

What is RefiNow? | Fannie Mae's low-income refinance program
Written by Publishing Team

RefiNow helps low-income borrowers refinance

Millions of homeowners still have mortgage rates above current market rates. But many believe they cannot refinance due to the initial cost.

Fannie Mae’s new RefiNow aims to change that.

RefiNow can help homeowners get better mortgage interest rates, reduce their monthly payments, and pay less out-of-pocket closing costs.

If you are making a low or middle income and are hoping to refinance, this program may be right for you.

Check eligibility for low-income refinance. Start here (January 14, 2022)

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What is RefiNow?

With the guidance of the Federal Housing Finance Agency (FHFA), Fannie Mae recently launched a new program called RefiNow.

RefiNow is a low-income refinancing option, designed to help more homeowners take advantage of the current low interest rate environment and avoid some of the financial hurdles that can make refinancing unsustainable.

“Borrowers whose income meets, but does not exceed, the median income for their area can apply for RefiNow through their mortgage company to refinance a loan on their primary home with reduced management fees and even brandish the appraisal cost if required,” explains Brett Bevinor. , chief technology officer of FasterFi in Millville, New York.

Fannie Mae RefiNow Benefits

The RefiNow program offers many perks to those who qualify, including a lower interest rate, reduced monthly payments, and savings on out-of-pocket assessment expenses.

“One of the main benefits of the RefiNow program is that it makes refinancing more accessible to a larger pool of qualified applicants at a time when interest rates are historically low,” Bevinor adds.

“Borrowers who meet the eligibility requirements can reach historically low rates without worrying about closing costs and other expenses affecting their savings.”

With RefiNow Refinance, you are guaranteed a lower interest rate and low monthly payments.

Also, if an evaluation of the transaction is required, it will likely have to be paid for. An appraisal credit of $500 will be made available to your lender, to be passed on to you, at the time you purchase your new loan.

Check eligibility for low-income refinance. Start here (January 14, 2022)

How does RefiNow work

To proceed with a RefiNow refinance, you must first determine if your current loan is owned by Fannie Mae or has been securitized. You can check this with Fannie Mae’s Mortgage Loan Finder.

Once you’ve verified that your loan is owned by Fannie Mae, you’ll need to use the Fannie Mae area median income lookup tool to confirm the average income in your area. This will ensure that the income of all borrowers on the loan does not exceed the maximum allowed by RefiNow.

The good news is that RefiNow has recently been expanded to include those making 100% or less of their area’s median income, up from the previous cap of 80%.

This means that more homeowners are now eligible for rehabilitation and you don’t need a very low income to qualify.

“The next step is to contact your loan officer. Since Fannie Mae does not provide loans directly to consumers, the borrower is more likely to apply through an existing mortgage lender or mortgage service provider,” notes Bevinor.

“Be aware that lenders are not required to participate in this program, so you may need to pursue RefiNow refinancing through another participating lender,” he explains.

RefiNow Eligibility Requirements

To be eligible for a RefiNow refinance, you must meet the following criteria:

  • Get a Fannie Mae mortgage on your primary residence
  • Earn income below the applicable limit, which is currently 100% of your area’s median income (AMI)
  • Not missed mortgage payments in the past six months, and not missed more than one payment in the past 12 months
  • You have a current credit score of 620 or higher
  • Loan to value ratio of 97% or less
  • Have a debt-to-income ratio of 65% or less

“Borrowers included in the new refinancing loan must be the same as the previous loan – you cannot add or remove any borrowers. RefiNow is only for a condominium unit,” says Mayer Dalal, managing director of mortgage lender MBANC, based in Manhattan Beach, California. Single master, not second homes or vacation homes.”

Fortunately, Fannie Mae recently relaxed the rules to qualify for RefiNow.

The agency has now eliminated the maximum 10-year loan spice requirement and has eliminated the $5,000 cap on funding for closing costs, prepaid items, and points.

Furthermore, any reduction in monthly mortgage payments is now allowed (previously, a minimum reduction of $50 per month was required).

Check your refinancing eligibility. Start here (January 14, 2022)

Disadvantages of Fannie Mae RefiNow

On the downside, Fannie Mae’s RefiNow program does not allow cash refinancing.

“You can only get a maximum of $250 back, and any other cash you get should go to pay off your mortgage or cover closing costs,” Dalal says.

Another defect? Your mortgage must be a loan backed by Fannie Mae. Other types of loans — such as Freddie Mac, FHA, VA, or USDA loans — are not eligible.

Fortunately, there are other options worth considering if you do not qualify for RefiNow.

Low Income Alternative Refinancing Options

RefiNow refinance is not your only option here.

You should consider one or more of the following alternative strategies especially if you do not qualify:

  • Freddy Mac Refi Possible Do you have a mortgage loan owned or insured by Freddie Mac? You can explore a Refi possible Refinance, which offers identical benefits and has roughly the same eligibility requirements as RefiNow Refinance
  • Standard Conventional Refinancing – If you have a loan that is not backed by the government, conventional refinancing may be able to lower your rate and charge lower costs with more flexibility than other refinancing options
  • Simplified Refinancing or IRRRL – If you have an FHA mortgage or a FAW home loan, consider, respectively, FHA Simplify Refinancing or a Interest Rate Reduction Refinancing Loan (IRRRL). Both programs include limited credit and underwriting documentation for the borrower. With less red tape required, rehabilitation can occur more quickly, although closing costs may still apply
  • loan modification Have you experienced a loss of income and cannot qualify for a standard refinancing? a Mortgage loan modification may help. This involves your lender agreeing to change the terms of your mortgage to avoid default and reduce your monthly payments. A loan modification does not replace your existing home loan or your lender, but it does restructure your loan to make it more manageable when you have difficulty making your mortgage payments.

Is RefiNow Right For Me?

Assuming you qualify, RefiNow can be a smart move that lowers your interest rate and results in you paying less over time.

This program helps low-income borrowers reduce their monthly mortgage payments. Even an extra $50 less per month can make a huge difference for a lot of people,” says Dalal.

He continues, “RefiNow is a win-win for everyone; it helps people save money and pay off their loans more responsibly, and it helps lenders get paid instead of dealing with late payments or defaults.”

In addition, qualifying is now easier thanks to Fannie Mae who has increased the median income limit for the region from 80% to 100%.

As Bevinor says, “Expanding the program allows more eligible borrowers to take advantage of the cost savings that come from refinancing.”

Check the new price (January 14, 2022)

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