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Lower-Income Homeowners Get New Refi Option

Owners with income a bit below the local median can save at least $50 monthly on mortgage payments, providing they meet other conditions, and Fannie or Freddie hold their loan.

WASHINGTON – The Federal Housing Finance Agency (FHFA) announced a new refinance option for lower-income homeowners – a reduced interest rate and lower monthly payments if they refinance their current home loan.

To qualify, the mortgage must be held by the agencies under FHFA, Fannie Mae and Freddie Mac (the Enterprises). FHFA estimates that borrowers who take advantage of this new refinance option could save an average of between $100 and $250 a month.

The new refinance option includes:

  • A requirement that the lender provides a savings of at least $50 in the borrower’s monthly mortgage payment, and at least a 50-basis point reduction in the borrower’s interest rate
  • A maximum $500 credit from the lender for an appraisal if the borrower isn’t eligible for an appraisal waiver (the Enterprises will provide the lender a credit of $500 upon the loan’s sale to an Enterprise)
  • A waiver of the 50 basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000

“Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing,” says Director Mark Calabria. “This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment.”

To qualify, a borrower must:

  • Have an Enterprise-backed, 1-unit single-family mortgage that is owner-occupied
  • Have an income at or below 80% of the area median income
  • Have not missed a payment in the past six months, and no more than one missed payment in the past 12 months
  • Not have a mortgage with a loan-to-value ratio greater than 97%, a debt-to-income ratio above 65%, or a FICO score lower than 620

The Enterprises’ new refinance option will be available to eligible borrowers starting this summer. FHFA posted a fact sheet about the new refi option on its website.

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