Fannie Mae will launch RefiNow this week, which could help lower-income homeowners save hundreds of dollars a month on their mortgage payments.
The program, which begins June 5, aims to help about 2 million homeowners lower the interest rates on their mortgages. Eligible homeowners could save an estimated $100 to $250 a month, according to the Federal Housing Finance Agency, Fannie Mae’s regulator.
Among the eligibility requirements, homeowners must earn 80% or less of their area’s median income to apply. Borrowers also must have a Fannie Mae–backed mortgage (use the loan lookup tool to find out). Borrowers must be current on their mortgage and have no missed payments in the last six months. The mortgage also can’t have a loan-to-value ratio above 97%, and borrowers’ FICO credit scores must be at least 620.
“Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs,” says Malloy Evans, senior vice president and single-family chief credit risk officer at Fannie Mae. “Fannie Mae’s new RefiNow option will help homeowners refinance by removing some of those barriers, improving affordability, and promoting sustainable homeownership.”
Under the program, participating lenders would be required to reduce eligible borrowers’ interest rate by at least one-half of a percentage point. That could be higher, however. Lenders also must waive the adverse market refinance fee for borrowers whose loan balance is no more than $300,000. Lenders must provide a credit of up to $500 if the borrower is ineligible for an appraisal waiver.
Lenders aren’t required to participate in RefiNow.
Freddie Mac will start its own refinance program later this summer.