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RefiNow Mortgage Program
The RefiNow Mortgage Program is designed to help lower income borrowers refinance their loan and reduce their monthly payment. Key benefits of the program include reducing your mortgage rate by at least .50% and lowering your mortgage payment. Other program benefits include a $500 appraisal fee credit and potentially lower closing costs.
The RefiNow Program also offers more flexible eligibility guidelines such as a permitting a lower credit score and higher debt-to-income ratio -- both of which make it easier to refinance your loan. The program also allows a loan-to-value (LTV) ratio of 97% which is helpful for borrowers who have minimal homeowners equity. Continue reading to learn more about program advantages, qualification requirements and how to apply for a RefiNow refinance.
Before you submit a loan application, your first step is to understand if you meet the qualification requirements for the RefiNow program. We review these guidelines in detail below but the most important guidelines are:
- Your mortgage must be at least a year old and owned or secured by Fannie Mae (keep in mind that Fannie Mae is not a lender -- which is the company you make your mortgage payments to -- but they may still own your loan)
- You cannot earn more than 100% of the area median income where the property is located
- Your mortgage must be current with no late payments within the previous six months and no more than one missed payment over the prior year (other than payments missed due to a COVID-19 forbearance)
If you determine you are eligible for the RefiNow program, your next step is to apply through approved lenders such as banks, mortgage banks, brokers and credit unions. Even if your current lender offers the program you are not obligated to work with them when you refinance. Instead, you should shop several lenders to find the best loan terms, including the lowest rate and fees.
The table below shows leading lenders in your area. We recommend that you contact multiple lenders to determine if they offer the RefiNow Program and to compare mortgage terms. Shopping lenders is the best way to save money on your refinance.
Fannie Mae Must Own or Secure Your Mortgage
As noted above, to be eligible for the RefiNow Program, your mortgage must be owned or secured by Fannie Mae. Fannie Mae does not provide mortgages directly to borrowers but in many cases your loan is sold to them and you continue to make your payment to your original lender or another lender that services your loan.
So even if you make your monthly payment to Wells Fargo or Bank of America, your mortgage may actually be owned or secured by Fannie Mae. In fact no one actually makes their mortgage payment to Fannie Mae so do not let that stop you from determining if you are eligible for the RefiNow program. You can use Fannie Mae's mortgage look-up tool to determine if they own or secure your loan.
Borrower Income Limit
To be eligible for the RefiNow Program, borrowers cannot earn more than 100% of the area median income (AMI) based on the property’s address. Please note that the combined income from all applicants listed on the mortgage counts toward the limit. For example, if the AMI where your home is located is $50,000, the combined income of the mortgage borrowers cannot be higher than $50,000.
Fannie Mae provides an income eligibility map that enables you to determine the area median income (AMI) for any property.
Borrower Savings
The mortgage rate on your new loan must be at least .50% lower than your current rate and your new monthly payment must also be lower. For example, if your current mortgage rate is 4.500%, your new rate must be 4.00% or lower. If your current monthly payment is $2,000, your new payment must be no greater than $1,999.
Mortgage Status
To be eligible for the program you must be current on your loan and not delinquent. If your mortgage was in forbearance due to COVID-19 you must resume your payments for at least three months.
Payment History
You cannot have any missed or 30 day late mortgage payments within the past six months and no more than one 30 day late payment in the past year, except for payments missed under a COVID-19 forbearance plan.
Loan-to-Value (LTV) Ratio
The maximum loan-to-value (LTV) ratio for the RefiNow Program is 97%, which means you are required to have at least 3% equity in your home. For example, if your home is valued at $100,000, the maximum loan amount you are eligible for is $97,000 ($100,000 * 97% LTV ratio = $97,000).
Mortgage Program
The RefiNow Program only allows fixed rate mortgages. Adjustable rate mortgages (ARMs) and interest only mortgages are not permitted.
Mortgage Seasoning
Mortgage seasoning means how old your mortgage is. To be eligible for the RefiNow Program your loan must be at least one year old but no more than 10 years old.
Loan Limit
Your new mortgage amount cannot be higher than the conforming loan limit, which is $726,200.
Type of Refinance
The RefiNow Program only permits rate and term refinances which means that the only terms of your mortgage that can change are your program, rate and loan length. Cash-out refinances are not allowed although you can take out a maximum of $250 in loan proceeds.
Prepayment Penalty
Although unlikely, your original mortgage may have a prepayment penalty if you refinance with the program but your new mortgage should not have a prepayment penalty.
Property Eligibility
Only single unit primary residences are eligible for the RefiNow program. Rental properties, second or vacation homes and multi-unit properties are not permitted.
Use our personalized mortgage quote service to compare refinance offers from leading lenders. Our quote form is free, no obligation and requires no credit check.
Minimum Credit Score
Applicants are required to have a minimum credit score of at least 620, which is lower than the score required for many mortgage programs but higher than the 500 to 580 minimum score for an FHA loan.
Borrower Debt-to-Income Ratio
The RefiNow Program permits a maximum debt-to-income ratio of 65%, which is significantly higher than the 40% to 50% ratio used by standard loan programs. Your debt-to-income ratio represents the maximum amount of your monthly gross income that you can spend on your mortgage payment, property tax, homeowners insurance and other debt expenses including credit cards and car, student and personal loans.
For example, if your monthly gross income is $5,000 and the lender applies a debt-to-income ratio of 65%, you can spend $3,250 on your mortgage payment, property tax, insurance and other debt expenses ($5,000 (income) * 65% (debt-to-income ratio) = $3,250).
Using a higher debt-to-income ratio makes it easier for applicants with lower incomes to refinance their loans. We should also highlight that lenders are required to confirm that you have the financial ability to repay your new mortgage.
Borrowers
The borrowers listed on the new RefiNow mortgage must be the same as the borrowers listed on the current mortgage. New borrowers cannot be added to the loan and borrowers can only be removed if the borrower who remains on the mortgage demonstrates that they have made the monthly loan payment entirely on their own for at least one year.
Use the FREEandCLEAR Lender Directory to search for refinance programs offered by top-rated lenders.
Mortgage Rate
In general, RefiNow mortgage rates are similar to the rates for standard refinance programs. We advise you to change lenders if they attempt to charge you a higher rate to use the program. Rates vary by lender, borrower and other factors so you should shop multiple lenders to find the mortgage with the best terms.
Closing Costs
The closing costs for a RefiNow loan should be lower as compared to other mortgage programs. Specifically, you receive a $500 closing cost credit if you are not granted an appraisal waiver and you are required to pay for an appraisal report. For loan amounts of $300,000 or less, lenders waive a fee equal to 0.5% of your loan amount which applicants are usually required to pay when they refinance. Additionally, you can include closing costs, discount points and prepaid expenses such as property tax and homeowners insurance in your mortgage amount.
Private Mortgage Insurance (PMI)
If your new LTV ratio exceeds 80%, you are required to pay private mortgage insurance (PMI), which is an extra monthly fee in addition to your loan payment.
Related FREEandCLEAR Resources
Sources
"Introduction of the RefiNow Option." Lender Letter LL-2021-10. Fannie Mae, May 5 2021. Web.
"RefiNow Mortgage Refinancing." Know Your Options. Fannie Mae, 2021. Web.
"Expanding Refinance Eligibility with RefiNow." Lender Letter LL-2021-10. Fannie Mae, October 20 2021. Web.
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