Fannie Mae's (OTCMKTS: FNMA) new, low-cost refinance option will be available sooner than expected. According to the GSE, the product -- dubbed RefiNow -- will officially launch on June 5.
At Freddie Mac (OTCMKTS: FMCC), where the loan has been named Refi Possible, the release date is August 30. Previously, the Federal Housing Finance Agency (FHFA) had simply said "summer" when announcing the program.
Once available, RefiNow and Refi Possible will open the door to reduced-cost refinances -- not to mention guaranteed interest rate and payment cuts -- to low-income borrowers. Here's what you need to know about these new loan programs.
RefiNow and Refi Possible
Fannie and Freddie's new loan options are designed for low-income borrowers, specifically those making 80% or less than the area's median income.
For those who qualify, the benefits are pretty huge. Not only are borrowers guaranteed at least a half-percent interest rate cut, but the refinance must save them at least $50 per month on their payment as well.
Additionally, borrowers can receive a $500 credit toward their appraisal and will have the 50-basis point adverse market fee waived (as long as the loan's under $300,000). They can also roll up to $5,000 in closing costs into their new loan balance.
According to the FHFA, these new loans should save the average borrower between $1,200 and $3,000 per year.
Qualifying for the new refi options
Unfortunately, investors won't qualify for Fannie and Freddie's new refis -- even if their income meets the requirements.
That's because RefiNow and Refi Possible will only be available on one-unit, single-family homes that are owner-occupied (meaning it must be your primary residence).
Other requirements for these new refinancing options include:
To use the program, borrowers must already have a Fannie Mae- or Freddie Mac-backed loan. If you're not sure yours falls into this category, use the Fannie and Freddie look-up tools to see for sure.