What You’ll Learn
New ways to refinance your mortgage (even if you’ve previously been denied)
How RefiPossible™ can help you reduce your monthly costs
Why you should refinance with Better Mortgage
Better Mortgage is thrilled to be one of the first lenders to offer RefiPossible™ refinances to the public on August 30, 2021. Thanks to Freddie Mac, the launch of this new program could make loan refinancing available to over 1 million homeowners, including those whose income was impacted by COVID-19. While 2020’s low interest rates sparked an unprecedented boom in mortgage refinancing, there was a significant difference between refinance activity and savings between low- and high-income homeowners. “Refi Possible will help reach those families who would benefit most from lowering their monthly mortgage payment,” says Donna Corley, executive vice president and head of Single-Family at Freddie Mac.
I’ve previously been denied a refinance, is RefiPossible™ for me?
Refi Possible was created especially for homeowners whose income is at or below 80% of their area's median income. Traditionally, borrowers with a debt to income ratio (DTI) higher than 50% have found it difficult to get lender approval for a refinance. RefiPossible™ expands refinance eligibility criteria to enable qualifying borrowers who were previously denied a mortgage refinance—due to a high DTI, prohibitive closing costs, or a late mortgage payment made within the last 12 months—to potentially save money by reducing their monthly mortgage payments.
How can I save with RefiPossible™?
As part of the RefiPossible™ program requirements, eligible homeowners are guaranteed to save at least $50 a month on their monthly mortgage payments by locking in a more favorable interest rate. However, the program estimates borrowers will be more likely to save between $100–$250 per month. That’s a saving of up to $3,000 per year.
If you’re eligible, but don’t have the upfront cash to close on the refinance, you can roll closing costs (up to $5,000) into your loan. This amount covers lender fees, points, and prepaid costs (not that Better Mortgage charges lender fees). When a home is refinanced, it’s common for the home to be appraised, but in some circumstances, this appraisal can be waived. If your home is not eligible for an appraisal waiver, you’ll receive a $500 credit to cover the appraisal fee. And when the loan closes, you’ll receive $250 cash out.
Am I eligible for RefiPossible™ with Freddie Mac?
Like any mortgage, there is a range of eligibility criteria you’ll need to meet and some types of Freddie Mac funded loans will not qualify. So let’s look at the RefiPossible™ criteria one by one.
Your existing mortgage needs to be backed by Freddie Mac and the mortgage must be for a 1-unit single-family residence that you live in (aka your primary home).
Check if your mortgage is backed by Freddie Mac here.
Unlike most other loans, with RefiPossible™ your DTI must be less than or equal to 65%. However, you’ll still need a mortgage loan-to-value ratio (LTV) of up to 97%, and a minimum indicator score of at least 620.
(A minimum indicator score is similar to a credit score—It’s the one underwriting score that determines whether a customer is eligible for a specific mortgage.)
The final criteria is linked to your mortgage payment history—if you missed a mortgage payment in the last 6 months (or missed 1 mortgage payment in the last 12 months) you won’t be eligible to apply.
If my mortgage isn’t backed by Freddie Mac, can I still refinance?
There’s more than one way to reduce your monthly mortgage costs. At Better Mortgage, when you apply for a refinance we check your eligibility for our full range of refinance loans. If you meet most of the eligibility criteria for a RefiPossible™ refinance, but your mortgage is serviced by Fannie Mae, you may be able to refinance your home using our RefiNow program.
The eligibility criteria for RefiPossible™ and RefiNow are the same except for the FICO score. Homeowners whose mortgage is backed by Fannie Mae must have a minimum FICO score of 620. Homeowners whose mortgage is backed by Freddie Mac must have a minimum indicator score of 620. (A minimum indicator score is similar to a FICO score—it represents the overall credit risk for a borrower and it’s the term Freddie Mac uses for the one underwriting score selected by a Loan Product Advisor and it represents the overall credit reputation risk for the transaction.)
The introduction of RefiPossible™ and RefiNow means there is a range of refinancing options available to borrowers with low incomes, low credit scores, low equity in their home, or a high DTI.
|Better Mortgage conventional loan refinance*||RefiNow™ Available through Better Mortgage||RefiPossible Available through Better Mortgage (in Aug 2021)|
|Mortgage backer||Any||Fannie Mae||Freddie Mac|
|Home type||Any residence, excluding manufactured homes||1-unit Primary residence||1-unit Primary residence|
|Borrower income||Enough to maintain 49% DTI||≤80% of the Area Median Income||≤80% of the Area Median Income|
|Mortgage payment history||0 late mortgage payments of 60+ days in the past 12 months||0 missed in the past 6 months
≤1 missed in the past 12 months
|0 missed in the past 6 months
≤1 missed in the past 12 months
|Credit score||≥620 credit score||≥620 FICO score||≥620 Minimum Indicator score|
|Appraisal required||You may be eligible for a waiver||Maybe. If you’re ineligible for a waiver, the lender will provide a credit up to $500.||Maybe. If you’re ineligible for a waiver, the lender will provide a credit up to $500.|
|Closing costs||Closing costs can be rolled into the loan||Up to $5,000 in closing costs can be rolled into the loan||Up to $5,000 in closing costs can be rolled into the loan|
*There may be some exceptions to these requirements for certain transactions. A Better Mortgage Loan Consultant can give more detailed information tailored to your unique refinance needs.
Better Mortgage offers conventional and RefiNow™ mortgage refinancing. From August 30, 2021, Better Mortgage will also offer RefiPossible mortgage refinancing. These 3 refinance loan types may help you lower your monthly mortgage payment. If you’re not eligible for one of these loan types, you may be able to refinance with a lender who offers HomeReady refinances or the Federal Housing Authority’s (FHA) Simple Refinance or Streamline Refinance program. These refinance programs aren't offered by Better Mortgage.
|HomeReady** (Borrowers may be required to complete a 4–6 hour homeowner counselling course)||FHA Simple Refinance**||FHA Streamline Refinance** (There are 2 ways to qualify for this type of refinance. With either option, the refinance must reduce your loan term, your interest rate, or both.)|
|Mortgage backer||Fannie Mae||The existing mortgage must be an FHA mortgage||The existing mortgage must be an FHA mortgage|
|Home type||1-unit principal residence, including eligible condos, co-ops, PUDs, and manufactured housing||Primary residences and HUD-approved secondary residences||Primary residences, HUD-approved secondary residences, or nonowner-occupied properties|
|Borrower income||<100% of the Area Median Income (for low-income census tracts there are no income limits)||N/A||N/A|
|Mortgage payment history||0 late payments in the past 6 months
≤1 late payments in the past 12 months
|0 late payments in the past 6 months
≤1 late payments in the past 12 months
|0 late payments in the past 3 months
≤0 late payments in the past 12 months
|Loan-to-value ratio||≤97%||< 97.75% of the adjusted property value
<85% for HUD approved secondary residence
|Credit score||≥620 credit score||>580 credit score||N/A Existing loan
Payment history is used
>580 credit score
(some lenders sccept a credit score as low as 550)
|Appraisal required||Lenders may have their own criteria for waivers||Yes||Maybe, it depends on the lender’s needs
No. You are even able to refinance if you owe more than the home is worth.
|Closing costs||Closing costs may be rolled into the loan, depending on the lender||Closing costs may be rolled into the loan, depending on the lender||You can roll closing costs into the loan if the property’s equity can cover the additional amount|
**A variety of lenders offer HomeReady and FHA refinance loans, but their borrower evaluation criteria may vary. Better Mortgage does not offer these types of loans.
Better Mortgage offers conventional and RefiNow mortgage refinancing. From August 30, 2021, Better Mortgage will also offer RefiPossible™ mortgage refinancing. These 3 refinance loan types may help you lower your monthly mortgage payment.
What if I’m not eligible to refinance with Better Mortgage?
If you’re not eligible for a conventional loan refinance, RefiPossible™, or RefiNow, through Better Mortgage, you may be able to refinance with a lender who offers HomeReady refinances or the Federal Housing Authority’s (FHA) Simple Refinance or Streamline Refinance program.
If you have an FHA loan and the value of your home has increased, or you want to keep your out-of-pocket costs very low, you might consider an FHA Simple Refinance. If you’re a homeowner with an FHA loan for a home that hasn’t risen in value (or the value of the mortgage exceeds the value of the loan), an FHA Streamline Refinance may be your best option.
Why refinance with Better Mortgage?
We keep your closing costs low because we charge zero commission or lender fees. To save you time, we’ve streamlined the refinance process from start to finish by building technology to automate many of the processes that used to be done manually. It’s faster and less expensive for us to create the loan, so we pass these dollar and time savings on to you.
You’ll start saving on your monthly mortgage payments sooner because we close up to 10 days faster than the industry average (our closing time averages 32 days). Better Mortgage was awarded NerdWallet’s 2020 Best Mortgage Lender for Refinance, including a perfect 5-star rating. We were also awarded a 4.9/5 by Bankrate. And you make decisions with confidence as we have experts available 7 days a week between 9 am–9 pm ET to help you understand what’s right for you.
Demand for the RefiNow™ and RefiPossible™ programs is expected to be extraordinary. RefiPossible™ launches early September with Better Mortgage.