Fannie Mae’s new refinancing program starts next week. What you should know
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Lower-income homeowners could potentially save hundreds of dollars a month on their mortgage with a government refinance initiative starting on.
Fannie Mae, one of two government sponsored and publicly traded companies that buys and sells mortgages, is on the 5th, which is the amount they pay each month. Households earning 80% or less of their region’s median income are generally eligible if they can meet other requirements.
“Many lower-income homeowners may feel they cannot afford a refinance, are convinced they will not qualify, or are unaware of the potential monthly savings,” said Fannie Mae in a statement.
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With mortgage rates hitting all-time lows in 2020, refinancing activity hit around $ 2.6 trillion a year, according to Freddie Mac, the other government-funded company that buys and sells mortgages. This is the highest annual total since 2003, when refinancing totaled $ 3.9 trillion.
According to the real estate portal Zillow, the average interest rate for a 30-year fixed-rate mortgage is 2.72%. For a 15-year loan, the average interest rate is 2.08%. According to Fannie Maes Economic and Strategic Research Group, the 30-year rate is expected to average 3% through 2021.
“I think this will have a huge impact on a lot of people,” said Ziggy Jonsson, director of financial products at Better.com mortgage lender, who participates in the Fannie Mae program.
“Anything that lowers mortgage payments frees up money for other things,” said Jonsson.
Refinancing would save these homeowners an estimated $ 100-250 per month, according to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. (Freddie will start his own refi program later this summer).
To be eligible, borrowers must have a Fannie Mae-covered mortgage on their home – which they must live in – and, as noted, have an income equal to or less than 80% of the median income in their area. In addition, they must not have missed any payment in the last six months and no more than one payment in the last twelve months.
In addition, your mortgage must not have a loan-to-value ratio of more than 97%, and it must have a debt-to-income ratio of less than 65% and a FICO credit score of at least 620.
Lenders would be required to reduce the borrower’s monthly mortgage payment by at least $ 50 and allow borrowers to reduce their interest rate by at least 50 basis points (one-half percentage point).
“It can’t be less than that, but it could be more,” said Jonsson.
Lenders would also have to waive the currently disadvantageous market refinancing fee for borrowers whose loan balance is no more than $ 300,000. And if the borrower is not eligible for a valuation waiver, the lender must provide a loan of up to $ 500.
Homeowners can contact any mortgage company they wish to refinance through the Fannie Mae program. While lenders are not required to participate, many are, including Quicken Loans (Rocket Mortgage), the largest mortgage lender in the country.
If you are unsure if your loan is owned by Fannie Mae, you can use the loan search tool.
“It’s good to see a lot more people have lower prices available,” said Jonsson. “Some people struggled to benefit from them.”