A winner for those having difficulty refinancing at today’s low interest rates due to insufficient earnings.

PROS (Several)

• Debt-to-Income (DTI) Ratio can be as high as 65% – Example Below (if you like math)
• $500 Appraisal Fee Credit
• Waiver of FHFA’s 0.50% refinance fee
• Up to 97% Loan-To-Value
•  Allows one late mortgage payment in 12 months
• 620 minimum credit score

CONS (Few)

• Qualifying Income must be less than 80% of County Area Median Income ($62,080 in IRC)
• Rate & Term Refinance only (no Cash-Out)
• Existing Loan must be owned by Fannie Mae

Key Requirements:

1. Must be a 1-unit primary residence
2. Interest rate must improve by at least one half of 1.0%
3. Monthly mortgage payment must reduce by at least $50

Here’s the Point: Fannie Mae just made it much easier to refinance a primary mortgage, especially for those whose earnings have reduced because of COVID.

Mike Kanuka, Founder & President

EXAMPLE:

Assume…

• Existing $200,000 30-year fixed rate mortgage at 4.25% ($1,400/month mortgage payment)
• $450 of other monthly obligations (auto/student loans, credit cards)
• $50,000 of household income yielded a DTI of 45%*:

DTI = ($1,400 + $450) monthly obligations DIVIDED BY: $4,167 monthly income ($50,000/12) = 45%

* Rule of Thumb: DTI should not be greater than 45%

However…

• Income reduces by 20% to $40,000
• Credit score permits a 3.25% refinance ($1,287 monthly mortgage payment) – BUT:
• Loan App declined because DTI is now 52%:

DTI = ($1,287 + $450) monthly obligations DIVIDED BY: $3,333 monthly income ($40,000/12) = 52%

Today with Fannie RefiNow…

• Pre-qualified for a rate reduction from 4.25% to 3.25%
• Income could actually reduce to $32,000 (by 36%) and DTI would still qualify at 65%:

DTI = ($1,287 + $450) monthly obligations DIVIDED BY: $2,666 monthly income ($32,000/12) = 65%