Do These Mortgage Relief Programs Relieve You?
You may or may not know that there are currently “relief” programs from both Fannie Mae and Freddie Mac to allow borrowers to still do a refinance loan when the value of the home is not there. While this program may not help many people that are far too backwards on the equity position in their home, it does help some.
What these programs are designed to do is allow you to borrow up to 105% of the appraised value of your home. So if the value of your home is $200,000, you could borrow up to $210,000. Where this saves people the most money is that these programs do not have mortgage insurance, either in an upfront fee and/or as a monthly payment. Especially now that the monthly MI factor on FHA loans is .85 or .9 per month and a max loan-to-value of 97.75%, these relief programs are truly a relief for those who are able to take advantage. There is a hitch with MI however, your previous loan regardless of Freddie or Fannie owned, is that it can not currently have mortgage insurance on it, whether it was monthly or lender paid, known as LPMI.
Refinance home loans are very tempting to do with the rates being so good, but home values can limit the ability to take advantage of these rates. Here are some things you should know. Fannie Mae or Freddie Mac must already own your mortgage and you can only take advantage of the current owners relief program.
Both Fannie and Freddie will allow up to a 60% debt-to-income ratio for owner occupied, single family homes and 50% DTI for second or investment homes. You must also have a minimum 620 credit score for the Freddie Mac programs and a minimum 620 credit score for owner occupied homes and a minimum 680 credit score for second or investment homes with Fannie Mae.
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.
You can not pay off or obtain new secondary financing for these programs, but if you have an existing second mortgage, there is no maximum combined-loan-to-value, so long as the
loan is approved by Fannie or Freddie’s underwriting systems.
Another restriction of both programs would be that ownership can not change from the loan being refinanced. So if you are looking to add or remove a borrower from the original loan, you would not be eligible on these programs.
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.
The above information is simply an outline, so if you are interested in finding out eligibility and qualification, you do need to apply with a loan officer.
Want to find out more about refinance loans, then visit The Mortgage Bill.
