An estimated two million home owners could be eligible for a new government refinancing program. In 2020, refinancing spiked in record numbers due to interest rates dropping below 3%. However, over two million lower-income home owners didn’t take advantage of the lower rates.

The new program is designed to help eligible borrowers save between $1,200 and $3,000 annually on their mortgage. Here are the eligibility requirements:

∙ Home owners must have a mortgage through Fannie Mae or Freddie Mac.
∙ Home owners must be living in the home for which they’re refinancing.
∙ Income must be at or below 80% of the median income in their area.
∙ They cannot have missed any mortgage payments in the past six months and no more than one missed payment in the past 12 months.
∙ They cannot have a loan-to-value ratio above 97%.
∙ They must have a debt-to-income ratio below 65% or a FICO credit score of at least 620.

Lenders will have a choice in whether they participate in the program. Those that do will be required to reduce the borrower’s monthly mortgage payment by at least $50 and reduce their interest rate by half a percentage point. Participating lenders will need to waive refinance fees for borrowers whose loan balance is less than $300,000. If the borrower is not eligible for the waiver of an appraisal, the lender will be required to provide a $500 credit to the borrower.

Some of the reasons that home owners haven’t already taken advantage of lower interest rates include one or more of the following:

∙ They didn’t think they would save enough money by switching.
∙ They were unsure of their current interest rate and didn’t know if switching was worth the trouble.
∙ Their credit score was too low to qualify for a refinance.
∙ Closing costs and fees were too high.
∙ Unemployment or reduced income would prevent them from qualifying.

Real Estate Term of the Week

Loan-to-Value Ratio: An assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate. LTV ratio is calculated by dividing the mortgage amount by the appraised property value of the home.

Platinum Service Realty