After the Federal Housing Finance Agency’s (FHFA) announcement of a new refinance option for low-income families offered through the government-sponsored enterprises, Fannie Mae released details about its new RefiNow option.
RefiNow makes it easier for eligible homeowners earning at or below 80 percent area median income (AMI) to refinance at lower interest rates and reduce their monthly payment. Qualifying borrowers with a Fannie Mae-owned mortgage will be able to take advantage of the program beginning June 5, 2021.
“Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs,” Malloy Evans, Fannie Mae senior vice president and single-family chief credit risk officer, said in a release. “Fannie Mae’s new RefiNow option will help more homeowners refinance by removing some of those barriers, improving affordability, and promoting sustainable homeownership.”
As mentioned in the FHFA’s statement, this program will help homeowners by requiring a reduction in the homeowner’s interest rate by a minimum of 50 basis points and a savings of at least $50 in the homeowner’s monthly mortgage payment; providing a $500 credit from Fannie Mae to the lender at the time the loan is purchased if an appraisal was obtained for the transaction, a credit that must be based to the homeowner; and waiving the 50 basis point up-front adverse market refinance fee that Fannie Mae otherwise charges to lenders on balances at or below $300,000.
In order to qualify, homeowners must have a Fannie Mae-backed mortgage secured by a one-unit, principal residence; a current income at or below 80 percent of the AMI; no missed mortgage payments in the past six months, and not more than one missed mortgage payment in the past 12 months; and a mortgage with a loan-to-value ratio up to 97 percent, a debt-to-income ratio of 65 percent or less, and a minimum 620 FICO score.