Owning a house is everyone’s dream, but paying a mortgage can be quite a strain on your monthly budget, especially if you are a low-income earner. Therefore, the government-sponsored organization, Fannie Mae, has announced a refinancing program under the name “RefiNow” which is expected to commence on June 5th. Beneficiaries of this initiative would be low-income, housing loan debtors who would now be able to enjoy a lower interest rate on their mortgage. Consequently, there will be a reduction in the amount of money going out from their pocket every month.
Households that earn less than, or equal to, 80% of the median income in their area will be eligible for applying to the RefiNow program, given that they meet the rest of the requirements defined by the company which has initiated this program.
Amongst the qualifying criteria, lies the condition that homeowners must have a mortgage backed by Fannie Mae, and they should essentially be living in the home for which assistance is being sought. Also, they must not have missed any payment during the last 6 months and should not have defaulted more than once in the past year.
Furthermore, the mortgage should not have a “loan-to-value ratio” higher than 97% and a “debt-to-income ratio” lower than 65%. Also, homeowners should have a minimum FICO credit score of 620.
Refinancing would make the lives of those who fall in low-income groups much easier. RefiNow alone is expected to result in savings worth $100-250 per month for each of these households.
Under this program, lenders are instructed to decrease the number of monthly mortgage payments by $50 or more and give debtors a reduction in interest rate which is equivalent to 50-basis-point, at least. However, the relief can be more than this amount if the lender wishes to provide a higher level of assistance, but it can not be lower than the stated percentage.
Borrowers who have a loan balance of $300,000 or less would also be exempted from paying the lenders the “adverse market refinance fee”. Furthermore, borrowers who do not qualify for an appraisal waiver would be eligible for receiving a credit of up to $500 from their lender.
Another benefit of this low-income housing scheme is that homeowners are allowed to approach any mortgage company of their choice for getting their loan refinanced. Although Fannie Mae does not essentially require lenders to participate in its program, many like Quicken Loans are voluntarily taking part in the initiative to help those struggling financially.