Low-income borrowers supported by Fannie Mae can save
Low-income borrowers could potentially save an average of $ 100 to $ 250 per month in mortgage payments as part of a new government refinancing initiative starting June 5.
As high-income borrowers rushed to refinance their mortgages last year taking advantage of historically low mortgage interest rates, more than two million low-income families failed to do so, according to the agency. federal housing finance.
In April, the FHFA asked Fannie Mae and Freddie Mac, two government-sponsored mortgage finance agencies, to roll out a new refinancing option to target low-income borrowers with agency-backed single-family mortgages.
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Is refinancing your home a good idea?
“Many low-income homeowners may believe they can’t afford to refinance, be convinced they won’t qualify, or ignore potential monthly savings,” said Katrina Jones, Vice President of Racial Equity Strategy & Impact at Fannie Mae. .
“They may be surprised to learn that they have options to make their monthly housing payments more affordable, and they can start by contacting any mortgage lender of their choice to explore refinancing now,” he said. she declared.
Monthly mortgage savings of up to $ 250
RefiNow makes it easier for qualifying homeowners with an area median income of 80% or less to refinance at a lower interest rate and lower their monthly mortgage payments. According to the FHFA, eligible families would realize, on average, monthly savings of between $ 100 and $ 250.
The option requires lenders to provide a significant refinancing advantage by ensuring a reduction of at least 50 basis points in their interest rate and savings of at least $ 50 on their monthly mortgage payments.
What about the refinancing fees?
Additionally, borrowers will receive a maximum credit of $ 500 from the lender if an appraisal is required. For loans to low-income borrowers with balances of $ 300,000 or less, Freddie Mac and Fannie Mae will waive the up-front 50 basis point refinancing market fee they otherwise charge lenders.
Despite the significant potential cost savings, more than a third of homebuyers in 2018 said they had not shopped before choosing their mortgage lender, according to a 2018 national housing survey.
Tips for refinancing
Experts suggest contacting several mortgage lenders to discuss refinancing options and to shop around the clock.
“The (range) of interest rates between lenders is a very real problem in this industry,” said Patrick Boyaggi, CEO of Own, a tech company that helps people save on mortgages through a group of regional lenders.
A 2020 Own Up veteran loan study found that the rate differences between loans offered by the nation’s top 20 VA lenders were over 1%.
“People don’t recognize it, but it could be the difference of $ 20,000 or $ 50,000 over the life of the loan in interest,” Boyaggi said. “Even a quarter of a percent can have a very profound impact on your personal bottom line.”
To be eligible for RefiNow, owners must have:
• A mortgage backed by Fannie Mae guaranteed by a main residence with 1 unit.
• A current income equal to or less than 80% of the region’s median income (not the income when they got the initial mortgage).
• No missed one mortgage payment in the past six months, and no more than one missed mortgage payment in the past 12 months.
• A mortgage with a loan-to-value ratio (a number used by lenders to determine the risk they take with a secured loan) of up to 97%, a debt-to-income ratio (compares how much you each owe each month to how much you earn) of 65% or less, and a minimum FICO (credit) score of 620.
Swapna Venugopal Ramaswamy is Housing and Economics reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal