Meet Brian and Lisa - They Need to Refinance Their Mortgage
Brian and Lisa have steady jobs – Brian is a high school teacher, Lisa is a nurse. They pay their bills on time, including their monthly mortgage payment. Like many homeowners, Brian and Lisa are unable to refinance to a lower interest rate because the value of their home value has declined.
Do Brian and Lisa qualify to refinance to a lower interest rate under the new plan? They may because they meet the following requirements:
- They own a one- to four-unit home.
- The loan on their home is owned or guaranteed by Fannie Mae or Freddie Mac.
- They are current on their mortgage payments and have not been 30 days late making a payment within the past 12 months.
- Their mortgage is no more than 125% of the value of their home; in this case they owe $258,000 on their first mortgage but their home value dropped to $250,000.
Like Brian and Lisa, you may be able to refinance to take advantage of lower interest rates to reduce your mortgage payments. If so, here are the answers to some of the questions you may be asking.
How do I know if I have a Fannie Mae or a Freddie Mac loan?
Go to Loan Look Up for contact information for Fannie Mae and Freddie Mac. You can call or fill out an online request form to find out if Fannie Mae or Freddie Mac owns or guarantees your loan.
How do I know if I am eligible?
Eligible loans include those where the first mortgage (including any refinancing costs) does not exceed 125 percent of the current market value of the home. For example, if your home is worth $200,000 but you owe $250,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
I have both a first and second mortgage. Do I still qualify to refinance under the program?
You may only refinance your first mortgage. If that mortgage is less than 125 percent of the value of the property, you may qualify.
Your eligibility will depend on whether you are able to make the new payments on the first mortgage. The lender on your second mortgage must agree to remain in the second position.
Will refinancing lower my payments?
Generally yes. If your mortgage interest rate is higher than the current market rate you should see an immediate reduction in your payments. If your existing mortgage requires you to pay interest only and no principal, or if you are currently paying only a low introductory (or “teaser”) rate, you may not see your current payment go down. However, refinancing to a low, fixed rate mortgage can reduce the risk of payment shock when your monthly payment amount changes, and refinancing could save you a great deal of money over the life of the loan.
What would my new interest rate be?
The rate will be based on market rates at the time of the refinance and any associated points and fees quoted by the lender.
Will refinancing reduce the amount that I owe on my loan?
No, refinancing will not reduce the amount you owe on your loan or any other debt you may have. However, by locking in a low fixed interest rate, it should save money over the life of the loan.
When can I apply?
You can apply now, and should reach out to your servicer or a housing counselor to determine if you qualify.