RefiNow is helping lower-income borrowers refinance

Millions of homeowners still have mortgage rates above current market rates. But many think they can’t refinance due to the upfront cost.

Fannie Mae’s new RefiNow program aims to change that.

RefiNow can help homeowners get better mortgage interest rates, reduce their monthly payments, and pay less for out-of-pocket closing costs.

If you make low or moderate income and hope to refinance, this program might be for you.

In this article (Skip to…)

• What is RefiNow?
• RefiNow benefits
• How it works
• Requirements
• Drawbacks
• Alternative refi options
• Is RefiNow worth it?

Under the guidance of the Federal Housing Finance Agency (FHFA), Fannie Mae recently rolled out a new program called RefiNow.

RefiNow is a low-income refinance option, designed to help more homeowners benefit from the current low-interest-rate environment and sidestep some of the financial hurdles that can make the refi process unaffordable.

“Borrowers whose income meets, but does not exceed, their area’s median income, can apply for RefiNow through their mortgage company to refinance a loan on their primary home while also reducing administrative fees and even waving the cost for an appraisal if one is required,” explains Brett Bivenour, chief technology officer at FasterFi in Melville, New York.

Check your low-income refinance eligibility. Start here (Nov 16th, 2021)

To pursue a RefiNow refinance, you first have to determine if your existing loan is owned or securitized by Fannie Mae. You can check this by using the Fannie Mae mortgage loan lookup tool.

Once you verify that your loan is owned by Fannie Mae, you’ll need to use Fannie Mae’s Area Median Income Lookup Tool to confirm your area’s median income. This will ensure that the income of all borrowers on the loan does not exceed the ceiling allowed by RefiNow.

The good news is that RefiNow has recently been expanded to include those making at or below 100% of their area’s median income, an increase from the previous cap of 80%.

That means more homeowners are now refi-eligible and you don’t need an ultra-low income to qualify.

“The next step is to contact your loan officer. As Fannie Mae doesn’t offer loans directly to consumers, the borrower will likely apply through their existing mortgage lender or mortgage servicer,” Bivenour notes.

“Be aware that lenders are not required to participate in this program, so you may need to pursue a RefiNow refinance through another participating lender,” he explains.

“Borrowers listed on the new refinance loan also have to be the same as those in the previous loan — you cannot add or remove any borrowers. And RefiNow is only for a one-unit principal residence, not second or vacation homes,” says Mayer Dallal, managing director for mortgage lender MBANC, headquartered in Manhattan Beach, California.

Fortunately, Fannie Mae recently loosened the rules to qualify for RefiNow.

The agency has now eliminated the maximum loan seasoning requirement of 10 years and removed the $5,000 cap on the financing of closing costs, prepaid items, and points.

What’s more, any reduction to your monthly mortgage payment is now allowed (previously, a minimum reduction of $50 per month was required).

On the downside, Fannie Mae’s RefiNow program doesn’t allow cash-out refinancing.

“You can only get a maximum of $250 back, and any other cash you take out has to go to pay down your mortgage or cover closing costs,” says Dallal.

Another drawback? Your mortgage must be a Fannie Mae-backed loan. Other types of loans — such as Freddie Mac, FHA, VA, or USDA home loans — don’t qualify.

Fortunately, there are other options worth looking into if you’re not eligible for RefiNow.

• Freddie Mac Refi Possible — Do you have a mortgage loan owned or securitized by Freddie Mac? You can explore a Refi Possible refinance, which offers identical benefits and has roughly the same eligibility requirements as a RefiNow refinance
• Standard conventional refinance — If you have a non-government-backed loan, a conventional refi may be able to lower your rate and charge lower costs with greater flexibility than other refinance options
• Streamline refinance or IRRRL — If you have an FHA mortgage loan or a VA home loan, consider, respectively, an FHA Streamline Refinance or an interest rate reduction refinance loan (IRRRL). Both programs involve limited borrower credit documentation and underwriting. With less red tape required, the refi process can happen more quickly, although closing costs may still apply
• Loan modification — Have you suffered a loss of income and can’t qualify for a standard refinance? A mortgage loan modification may help. This Involves your lender agreeing to alter the terms of your mortgage to avoid default and decrease your monthly payments. A loan modification does not replace your existing home loan or your lender, but it restructures your loan to make it more manageable when you encounter difficulty making your mortgage payments

Verify your new rate (Nov 16th, 2021)