What is the Refinow Program? (Everything You Need to Know)
RefiNow is assisting low–income borrowers to refinance their mortgages.
RefinNow has come as a sigh of relief to homeowners. Its Fannie Mae-backed mortgages allow homeowners to repay their loans at a cheaper interest rate. If you fit into the low – moderate income demography, then this program might just be what you need. Read on to find out more about this new program.
What is RefiNow
RefiNow is an inexpensive refinancing solution designed to make it simpler and less costly for qualified homeowners who want to lower their monthly housing expenses to do so. This is made possible by taking advantage of the current low interest rates. With a DTI of up to 65 percent, RefiNow is a wonderful choice for creditworthy borrowers who may not have been able to refinance in the past. It is available to borrowers earning up to or less than 100 percent of the local median income.
How Does RefiNow Differ From Traditional Mortgages?
If you want to know why individuals refinance, you must first understand their motivation. Most homeowners save money by refinancing their mortgages. Every day, mortgage rates change. By refinancing your mortgage at a lower interest rate, you may save a lot of money over the duration of your loan vs a loan modification.
If you use typical refinancing methods, you have to pay for an assessment and refinancing fees. Low-income homeowners may not be able to pay these charges and hence cannot refinance their homes.
The advantages of refinancing are not always assured in classic settings. When it comes to qualifying for a loan, a borrower’s credit score, debt-to-income ratio, and other factors are taken into consideration. As a result, although many homeowners hope to save money by refinancing, this isn’t always the case.
With RefiNow, you won’t have to deal with any of these hassles associated with conventional refinancing. As a result of the program’s no-cost refinancing, more homeowners may take advantage of it. Cheaper interest rates and lower monthly payments are also guaranteed as part of this scheme.
Who Is RefiNow For?
As borrowing rates plummeted in 2020, millions of people rushed to refinance their homes. Only a small percentage of them were low-income homeowners, according to the Federal Housing Finance Agency (FHFA).
RefiNow is aimed at homeowners with lower income levels. Many low-income homeowners are unable to refinance because of the large upfront costs. Low-income borrowers with Fannie Mae-backed mortgages will be able to refinance and benefit from reduced interest rates and other perks.
The timing couldn’t be better for RefiNow. Refinancing with a lower interest rate may aid families whose earnings were affected by the epidemic. Some homeowners may be able to prevent foreclosure with a reduced monthly payment.
Benefits of the Fannie Mae RefiNow program
RefiNow is designed to make refinancing more available to specific populations of homeowners by eliminating some of the hurdles to doing so and ensuring lower interest rates. Homeownership as a whole becomes more sustainable as a result of this practice.
So, how exactly does RefiNow ease refinancing?
Reimbursement for Appraisal
Many refinance options necessitate the use of an appraisal, which is a costly process that many homeowners are unable to afford. If an appraisal is required for refinancing, the lender will get a $500 credit from Fannie Mae when the loan is bought. The lender is then responsible for transferring the credit to the homeowner.
By refunding the homeowner for the assessment, Fannie Mae helps to reduce the upfront costs of refinancing a mortgage. Because this expense often discourages low-income homeowners from exploring their refinancing alternatives, this $500 credit makes refinancing more affordable for a larger number of borrowers.
Fannie Mae levies a 50 basis point up-front adverse market refinancing fee on most refinance mortgages under $300,000. That equates to a 0.5 percent cost on a refinancing loan. Fannie Mae waives this charge for RefiNow mortgages thereby, considerably lowering the initial cost of refinancing.
A reduction in the interest rate is required.
The homeowner’s interest rate must be decreased by 50 basis points, or 0.5 percent, from their existing loan rate in order to qualify for RefiNow. Additionally, they demand that doing so results in a decrease of at least $50 in the homeowner’s monthly mortgage payment.
How the RefiNow program works
You must first identify whether or not your current loan is held or securitized by Fannie Mae before you can proceed with a RefiNow refinancing. You can confirm this by using the Fannie Mae mortgage loan search tool.
You’ll need to use Fannie Mae’s Region Median Income Lookup Tool to validate the median income in your area once you’ve verified that the company holds your loan. This helps to ensure that the income of all borrowers on loan will not exceed the limit set by RefiNow, and the loan will be approved.
However, the good news is that RefiNow has just been increased to accommodate anyone earning at or below 100 percent of the median income in their region, an increase from the prior maximum of 80 percent.
More homeowners are now qualified to refinance, and you no longer have to have a very low income in order to be approved for a loan.
To proceed, you must first speak with your loan officer. A customer will most likely have to apply through their current mortgage lender or mortgage servicer since Fannie Mae does not provide loans directly to consumers.
Because lenders are not compelled to participate in this program, you may need to seek a RefiNow refinancing through another participating lender.
Providing homeowners with a guaranteed reduced mortgage rate and payment, RefiNow has the potential to save them hundreds of dollars each year. According to the Federal Housing Finance Agency, the initiative will save most borrowers between $100 and $250 per month on their mortgage payments. RefiNow borrowers might save anywhere from $1,200 to $3,000 per year as a result of this.
Am I Eligible to Apply for RefiNow?
To qualify for a RefiNow refinancing, you must satisfy the following requirements:
- Have a Fannie Mae–owned mortgage on your principal house.
- Earn less than the appropriate maximum, which is presently 100 percent of your area’s median income (AMI)
- Be remarkably consistent in your mortgage payments, with no missed mortgage payments in the last six months and no more than one missed payment in the last 12 months.
- Have a current credit score of 620 or better
- Have a loan–to–value ratio of 97 percent or less.
- Have a debt–to–income ratio of 60% or below.
Borrowers mentioned on the new refinancing loan must also be the same as those listed on the old loan – no borrowers may be added or removed. And RefiNow is only available for a single-unit primary dwelling, not a second or vacation home.
Fortunately, Fannie Mae has relaxed the requirements for qualifying for RefiNow. The agency has now lifted the maximum loan seasoning requirement of ten years, as well as the $5,000 restriction on the financing of closing expenses, prepaid goods, and points. Furthermore, any decrease in your monthly mortgage payment is now acceptable (before, a minimum reduction of $50 per month was necessary).
Requirements to qualify for RefiNow
The documentation requirements vary based on the income type of an individual.
- Base Pay (non-variable): The borrower’s most recent year-to-date paystub, dated no more than 30 days before the loan application date
- Base Pay (variable) Tip, Bonus, Overtime Income Commission Income: Year-to-date paystubs and W2s for the most recent one-year period for the borrower
- Military Income: Military Leave and Earnings Statement
- Self-employment: Personal and corporate tax returns for one year, unless the requirements to waive business tax filings are completed according to the Selling Guide.
- Alimony, Child Support, or Separate Maintenance: A copy of the divorce decree, separation agreement, court order, or comparable documents, as well as one month’s receipt documentation
Additionally, the following documentation criteria must be met:
- In line with the Selling Guide, verbal employment verification (either full-time or part-time) is required.
- Verification of money is necessary before closing. Acceptable asset paperwork comprises one recent statement (monthly, quarterly, or yearly) that shows the asset’s current balance.
- It is necessary to verify and take into account periodic alimony and child support payments as a liability, if appropriate. An acceptable piece of paperwork includes a copy of the divorce decision, separation agreement, court order, or other comparable documents proving the amount of the obligation incurred.
Fannie Mae RefiNow drawbacks
On the flip side, the RefiNow product offered by Fannie Mae does not allow for cash-out refinancing.
Only a maximum of $250 in cash may be refunded, and you must use any additional money you withdraw to pay down your mortgage or cover closing expenses.
Fannie Mae must guarantee the loan on which you are taking out a mortgage. The program does not accept other forms of loans, such as those from Freddie Mac, the FHA, the VA, or the USDA.
Alternative low-income refinance options.
You don’t have to settle for a RefiNow refinancing, especially if you don’t qualify. You can consider one or more of the alternative options listed below:
- Freddie Mac Refi Possible – Do you have a Freddie Mac-owned or securitized home loan? You may look into a Refi Possible refinancing, which provides similar advantages and has about the same qualifying conditions as a RefiNow refinance.
- Standard conventional refinancing – If you have a non–government-backed loan, a conventional refi may be able to cut your interest rate and charge cheaper fees while providing more flexibility than other refinance choices.
- Streamline refinancing or interest rate reduction refinance loan – If you have an FHA mortgage loan or a VA home loan, consider an FHA Streamline Refinance or an interest rate reduction refinance loan (IRRRL). Both programs have strict credit paperwork and underwriting requirements for borrowers. The refi process may go more swiftly now that there is less red tape involved. However, closing expenses may still apply.
- Loan modification – Have you lost your job and are unable to qualify for a regular refinance? A home loan modification may be beneficial. This entails your lender agreeing to change the conditions of your mortgage in order to prevent default and lower your monthly payments. When you have difficulties paying your mortgage payments, a loan modification restructures your loan to make it more reasonable.
Is RefiNow Suitable for me?
If you meet the requirements, a RefiNow refinancing might be a wise decision that lowers your interest rate resulting in you paying much less over time.
Borrowers with lesser incomes might benefit from this program by lowering their monthly mortgage payments. Even a slight reduction of $50 per month may make a significant impact on the lives of many individuals.
A win-win situation exists when customers use RefiNow; it helps them save money and pay back their loans more responsibly while also assisting lenders in getting paid rather than having to deal with late payments or defaults.
Furthermore, since Fannie Mae has increased the regional median income restriction from 80 percent to 100 percent, it is now much simpler to qualify for a mortgage.
Refinancing offers significant cost reductions, and by expanding the program, more qualifying borrowers may take advantage of these benefits.
How to Refinance with RefiNow
RefiNow was available to qualified homeowners as of June 5, 2021. Unlike other financial institutions, Fannie Mae does not provide loans directly to lenders. A secondary mortgage market is where it purchases and guarantees mortgages, rather than the primary mortgage market. This holds true for both new and refinancing loans.
As a result, in order to take advantage of the Refi Now program, you’ll need to refinance with a lending institution. Inquire with your current lender (or a new lender) about your refinancing possibilities, and specify that you believe you may be eligible for RefiNow. If you meet the criteria, your lender will check your eligibility and take you through the rest of the procedure.