Refinance Relief: Relief For Some, But Not All
Refinance Relief… If you have not heard, Fannie Mae and Freddie Mac have been doing refinance loans for borrowers that are backwards in their homes. Although backwards is limited to 105% of an appraised value, which is mainly helpful for those who had some equity to begin with.
To give you an idea of what you could borrow, if your home value is $250,000, you could borrow up to $262,500. Keep in mind, doing a refinance has costs involved, so you may or may not have to have money to bring in to close the new loan. If qualified, these programs are still a better option than doing an FHA refinance, which has a 1% Upfront MI fee, plus a .85 or .9 monthly MI payment and a max of 97.75% to the appraised value.
Since refinancing your home can be more difficult these days, here are some additional things to know about these programs. Fannie or Freddie must be the current owner of the loan. You are only allowed to do the relief program of the current mortgage holder. So if Freddie Mac owns your loan, you cannot do the Fannie Mae relief program, you must do the Freddie Mac program.
Your current loan can not have mortgage insurance on it, monthly or lender paid, known as LPMI. You must also have at least a 620 credit score or 680 for some second home and investment homes.
Ownership changes are not allowed, owners need to be the same as the loan being refinanced. So those who have gotten divorced or if one party has below a 620 mid credit score, would not be eligible on these programs.
Up to 60% debt-to-income ratios are allowable for owner occupied, single family homes. Up to 50% DTI for second and investment homes. The debt-to-income or DTI is based on the new
payment and not the mortgage loan being paid off.
Paying off or obtaining a new second mortgage is not allowed, but if there is an existing second, you can to subordinate the second. For this instance, there is no maximum combined-loan-to-value.
These relief programs are “no cash out” and are restricted to $250 cash back at close. You can roll in closing costs of the loan into the new loan, but Freddie Mac will only allow $5000 of the costs to be rolled in. So, those with limited “liquid” assets, may have a more difficult time having enough money to close the loan.
While I have tried to give a rough overview of these programs, each applications eligibility and qualification is dependant on the particulars of that application and lender.
Want to find out more about refinance loans, then visit The Mortgage Bill.
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