RefiNow And Refi Possible: What Are They And How Do They Work?

Your finances benefit from lower mortgage payments and lower interest rates. One way to accomplish this is to refinance at the right time. However, maybe your finances have been complicated since you originally took out your loan and you haven’t been able to qualify. RefiNow™ and Refi Possible^SM offer more lenient requirements that could enable you to qualify and save.¹

What Are The RefiNowTM And Refi PossibleSM Programs?

At the direction of the Federal Housing Finance Agency, Fannie Mae and Freddie Mac created rate/term refinance programs with some more flexible requirements around credit and debt levels in order to help with mortgage affordability for homeowners who could use the relief. The idea is to allow those who most need the help to lower their mortgage rate and monthly payment.

We’ll get into qualification requirements a bit later on, but for now, it’s important to note that if your original loan was with Fannie Mae, the program for you is RefiNow™. If the loan is with Freddie Mac, you would refinance with Refi Possible^SM.

How Fannie Mae RefiNow^TM Works

Fannie Mae RefiNow™ allows you to do a refinance for the purpose of lowering your rate and/or changing your term. In addition to requirements that are somewhat more forgiving, this program has a couple of built-in advantages. At a minimum, to qualify for this refinance option, you must benefit in the following ways:

• An interest rate reduction of at least 0.5%
• A reduction in your monthly mortgage payment encompassing principal and interest (as well as mortgage insurance payment, if it applies)

An appraisal may or may not be required. If it is, you’ll get a $500 credit toward that appraisal. RefiNow™ is specifically for conventional loans originally backed by Fannie Mae. If your loan is with Freddie Mac, you’ll want to go with Refi Possible^SM instead.

How Freddie Mac Refi Possible^SM  Works

Refi Possible^SM and RefiNow™ were both created with the intention of being twin programs. It’s two sides of the same coin. It’s just that if your home loan was originally funded by Freddie Mac, you’re going to have the new mortgage also funded by Freddie Mac and it’ll be a Refi Possible^SM mortgage. The benefits of utilizing the program are the same.

• Minimum 0.5% interest rate reduction
• Lower monthly mortgage payment (excluding taxes and insurance)
• $500 credit toward any required appraisal

RefiNowTM And Refi PossibleSM Qualification Requirements

Now that you know how they work, it’s important to go over qualification. Here are the basic guidelines:

• Mortgage investor: The funding for your original loan prior to the refinance has to come from Fannie Mae or Freddie Mac. If you’re not sure who the original investor is, you can check using lookup tools provided by Fannie Mae and Freddie Mac.
• Income limits: In order to qualify for this refinance option, you can’t make more than the median income in your area. You can find this using Freddie Mac’s income lookup tool. For the purposes of these options, you want to look at the row that says 100% median income.
• Payment history: You can’t have any payments that are 30 days late in the last 6 months. Only one payment can be 30 days late in the last year. For Refi Possible^SM, Freddie Mac requires no 60-day late payments in the last year.
• Credit score: Your qualifying FICO^® Score should be a median of 580.
• Debt-to-income ratio (DTI): Your DTI refers to the percentage of your monthly income that goes toward making the minimum payments on your existing debt. To qualify for this option, you want a DTI no higher than 65%.
• Occupancy and property type: This refinancing option is available on 1-unit properties occupied as a primary residence. At this time, co-ops are ineligible.
• Existing equity: You need at least 3% equity in your home to qualify for this option. The number is 5% if you have a non-occupant co-borrower on your loan.

Pros And Cons Of RefiNowTM And Refi PossibleSM

The RefiNow™ and Refi Possible^SM both have benefits and disadvantages. Let’s run through them.

RefiNow^TM Program Pros And Cons

RefiNow™ has a few big advantages. Let’s start here.

• More flexible requirements: A 580 median credit score requirement and up to 65% DTI mean you may be able to qualify for this option even if you haven’t qualified to refinance under other programs in the past.
• Lower monthly payment: The monthly payment has to be lowered under this loan option. A smaller payment means that you could have more room in your monthly budget.
• Reduced interest rate: Because your interest rate has to be reduced by at least 0.5%, you also save money over the life of the loan.
• Appraisal credit: If an appraisal is necessary, you’ll receive a $500 credit toward it.

There are a few downsides:

• Loan must be owned by Fannie Mae: If it’s not owned by Fannie Mae, you may not qualify for this option.
• Income limits: You can’t make more than the median income in your area.
• Cash-out refinancing is not an option: This is a rate/term refinancing option only. This means you can’t use this program if your intention is to convert some of your existing equity into cash.

Refi Possible^SM  Program Pros And Cons

As we discussed earlier, RefiNow™ and Refi Possible^SM are meant to mirror each other in terms of setup and qualifications. Because of this, the advantages and disadvantages of the two programs are also the same. You’re always going to benefit from a lower payment, reduced interest rate and more leniency in terms of guidelines.

When it comes to the cons, instead of requiring that the investor be Fannie Mae, Refi Possible^SM mortgages are funded by Freddie Mac. Everything else is the same in terms of income limits and only having the ability to lower your rate or change your term under this option.

The Bottom Line

RefiNow™ and Refi Possible^SM are mortgage programs intended to allow those who may have struggled to refinance in the past the opportunity to get a lower rate or change their term while at the same time lowering their payment. This is accomplished through qualifications that are less strict than some similar programs.

It’s important to note that your original mortgage must have come from either Fannie Mae or Freddie Mac to qualify for these options. Additionally, you can’t use either of these programs to take cash out. If this won’t work in your situation, we encourage you to look at other types of refinancing.

If you would like to go over your options, we’d love you to apply online with our friends at Rocket Mortgage^®. You can also give them a call at (833) 326-6020.

¹ Freddie Mac and Fannie Mae have adopted a new refinance option for loans to borrowers with incomes at or below 100% of area median income, and you may be eligible to take advantage of this program. If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under this refinance option. You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites:

• Freddie Mac Loan Look-Up Tool (https://loanlookup.freddiemac.com/) or
• Fannie Mae Mortgage Loan Lookup (https://www.knowyouroptions.com/loanlookup)