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Homebuying Education

New Programs Help Lower-Income Borrowers Refinance to Save

Maryann Salt | 28 Jun 2021

In tough times, those living on lower incomes are hit hardest.

Soaring home prices, job losses, and inflation resulting from the Covid-19 pandemic have only made it more difficult for those struggling to pay the bills.

To help, the Federal Housing Finance Agency (FHFA) has announced a new affordable housing initiative targeting low-income borrowers that already have a mortgage financed with Fannie Mae or Freddie Mac.

Fannie Mae’s “RefiNow” option is available now. Freddie Mac’s “Refi Possible” will be available starting August 30.

The programs will primarily help those who are making 80% or less of the median income in their area save money by refinancing their existing mortgage to get a lower interest rate. Some lenders also will offer these programs to those making more, depending on the county where the home is.

“Racial and income disparities in refinance take-up rates have persisted for far too long,” said Sheila C. Bair, Fannie Mae’s Chairwoman of the Board, in a statement.

“With this initiative, we strive to narrow the gap. We thank FHFA for its strong leadership to help all eligible homeowners reduce their monthly housing costs by taking advantage of the historically low mortgage interest rates.”

At Landed, we are already seeing essential professionals who have a mortgage through Fannie Mae or Freddie Mac reach out to get advice and see if they are eligible. (You can contact us at postpurchase@landed.com if you have questions.)

“This is a wonderful chance for many people to reduce their monthly bills and we are thrilled to be able to help essential professionals – many who sacrifice big paychecks in order to do the work they love,” said Angie Kearns, Landed’s Principal Broker. “We talked to several mortgage experts and they say there’s likely two million borrowers who can lower their mortgage with these programs.”

These programs might sound familiar. During the Great Recession, the government had a similar program called the Home Affordable Refinance Program (HARP). The program helped millions of homeowners get on their feet, but expired in 2018.

Now, those who have not been able to take advantage of the low-interest-rate environment and have little home equity may be able to get help.

Here’s some of the fine print of the programs to consider:

  • There must be a net tangible benefit of at least $50 in savings per month.
  • 65% debt-to-income ratio is allowed. For context, the standard debt-to-income ratio on a standard mortgage is 43%.
  • The lending loan-to-value maximum is 97%. This means you don't need to have a lot of equity in your home to qualify.
  • The credit score requirement is 620.
  • Appraisal waivers are allowed and if you do not qualify, the lender can provide a maximum $500 credit to reimburse any appraisal cost.
  • If your loan amount is at or below $300,000, there's further interest rate savings.

If you have partnered with Landed via our down payment program, you also need to:

  • Have made your last six mortgage payments on time and not had more than one late payment in the past 12 months.
  • Not be in forbearance. If you are, you'll need to exit forbearance and have made at least six monthly on-time payments before you apply.

“At Landed, we have made it our mission to help the amazing essential professionals who are there for us each and every day,” Angie added. “We can’t wait to help them spend less on their housing costs and regain more financial freedom.”

Have questions about your eligibility? Contact us at postpurchase@landed.com and we will be happy to help!

And not sure if your mortgage is owned by Fannie Mae or Freddie Mac? Use Fannie Mae’s lookup tool and Freddie Mac’s lookup tool to check.

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About the Author

Maryann Salt

Maryann is Landed's Investment Operations Lead.

Looking for Landed's down payment program? Due to a temporary unavailability of DPP investment funds, all Landed metro areas are being put on a DPP waitlist effective September 8, 2022. You can read all the details (including FAQs) here if you would like to know more.