2 million homeowners are eligible for this new mortgage refinancing program
Lower-income homeowners could benefit from a new US government refinancing program.
Eligible borrowers will be able to refinance their mortgage at a reduced interest rate and a lower monthly payment starting this summer. That would save them an estimated $ 100-250 a month, according to the Federal Housing Finance Agency, which oversees mortgage lenders Fannie Mae and Freddie Mac.
“Over the past year there has been an increase in refinancing, but more than 2 million low-income families failed to take advantage of record-low mortgage rates by refinancing,” said Mark Calabria, director of the agency, in a statement.
“This new refinancing option is designed to help eligible borrowers who have not yet refinanced save between $ 1,200 and $ 3,000 a year on their mortgage payments,” Calabria said.
After mortgage rates hit historic lows in 2020, refinancing activity hit around $ 2.6 trillion a year, according to Freddie Mac. This is the highest annual total since 2003 when a refinance of $ 3.9 trillion was recorded.
The average interest rate for a 30-year fixed-rate mortgage is 2.95% according to the real estate location Zillow. For a 15 year loan, the average interest rate is 2.13%.
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To be eligible for the new refinance program, borrowers must have a Fannie or Freddie backed mortgage on the house they must live in and an income of 80% or less of the median income in their area. You must not have missed any payments in the past six months and no more than one in the past twelve months.
In addition, your mortgage must not have a credit-to-earnings ratio of more than 97%, and it must have a debt-to-income ratio of less than 65% or a FICO credit score of at least 620.
In the meantime, lenders would have to cut the borrower’s monthly mortgage payment by at least $ 50 and the interest rate by 50 basis points (one-half percentage point).
Lenders – Who Have the Choice to Participate in the Program – In addition, the current adverse market refinancing fee would have to be waived for borrowers whose loan balance does not exceed $ 300,000. And if the borrower is not eligible for a judgment waiver, the lender would have to provide a loan of up to $ 500.